Fed's Waller says weak job market justifies rate cut in December

Federal Reserve Governor Christopher Waller said data that emerged during the 43-day U.S. government shutdown show the labor market is “near stall speed” — state unemployment claims ticked up, layoffs rose and there’s no sign of building wage pressures — while inflation, excluding temporary tariff effects, is close to the Fed’s 2% target and growth has likely slowed. Citing private-sector indicators and delayed public data (including the September jobs report), Waller argued these conditions warrant another quarter-point (25 basis point) rate cut at the Fed’s Dec. 9-10 meeting to provide insurance and move policy toward neutral, warning that restrictive policy is weighing on lower- and middle-income households; he is also a candidate to succeed Chair Jerome Powell.

Analysis

Federal Reserve Governor Christopher Waller said data that became available during the 43-day federal government shutdown indicate the U.S. labor market is "near stall speed," citing a slight rise in state unemployment claims, an increase in layoffs, and no evidence of building wage pressures; the September jobs report was delayed by the shutdown. Waller noted that, excluding what he called the likely temporary impact of tariffs, inflation is "relatively close" to the Fed's 2% target and that economic growth has likely slowed, supporting his view that restrictive policy is weighing on lower- and middle-income households.

Waller argued those conditions, corroborated by private and partial public data sources including ADP, state claims and surveys from the Conference Board and University of Michigan, warrant a further quarter-percentage-point rate cut at the December 9-10 Fed meeting as insurance and to move policy toward neutral. He framed the move as precautionary, saying recent monthly data are unlikely to change his view ahead of the December meeting.

Waller's dovish stance and his profile as a candidate to succeed Chair Powell increase the potential market impact of his comments; the near-term risk is data-driven reversals if the delayed September report or upcoming inflation prints surprise on the upside, so upcoming labor and inflation releases are clear short-term catalysts for repricing interest-rate expectations.

Key Decisions for Investors

• Position modestly for a higher probability of a 25bp Fed cut in December by increasing exposure to assets that benefit from easing (long-duration fixed income and rate-sensitive equities),
• Maintain tactical hedges and monitor the delayed September jobs report, weekly state unemployment claims and near-term inflation prints as potential triggers to trim or reverse easing-oriented positions,
• Watch Fed communications and leadership dynamics — particularly Waller's public comments — as drivers of market tone and be prepared to adjust duration and credit exposure if labor or inflation data deviate materially from the current, weaker-growth/near-target inflation narrative