Fed’s Waller: ‘Let’s Get On with’ Inflation

Federal Reserve Governor Christopher J. Waller used a Thursday night speech at the Economic Club of Miami to press, yet again, for easier money. Declaring that “the time has come to ease monetary policy and move it to a more neutral stance,” the long-time dove said he would have cut rates in July and plans to vote for a 25-basis-point trim at the September 16–17 Federal Open Market Committee (FOMC) meeting. Traders hardly blinked; futures already penciled in the move and give “significant odds” to one or two more reductions before year-end. Meanwhile, gold briefly touched $3,422 an ounce, a reminder that hard assets tend to stir when central bankers reach for the stimulus lever.

Waller revealed he had been alone in arguing for a quarter-point cut at the July gathering, asserting that subsequent data “confirm that was the right call.” With the policy rate sitting at 4.25 %–4.50 %, he estimates it is still 1.25–1.50 percentage points above the longer-run “neutral” rate of 3 %. “Based on what I know today, I would support a 25 basis point cut,” he reiterated, adding that anything larger would require an unforeseen collapse in next week’s payroll report. Markets got the message: odds of a September cut jumped to nearly 90 %, according to CME FedWatch.

Soft economic numbers supplied the rationale. Real GDP grew only 1.2 % annualized in the first half, and Waller conceded that incoming indicators “point to continued sluggish activity.” Payroll figures, after hefty downward revisions, show gains of just 35,000 jobs a month since May, and the governor warned the September 9 benchmark could even reveal outright contraction. Private-sector hiring averaged a meager 52,000 during the same stretch, and forthcoming adjustments may erase another 60,000 per month. The headline 4.2 % unemployment rate, he cautioned, “may be masking weakening demand in the labor market.”…