At the next Federal Open Market Committee (FOMC) meeting Dec. 9-10, the final one of 2025, the voting committee will decide whether to adjust interest rates—with one voting member, Federal Reserve Governor Christopher Waller, already making his voting intentions clear.
In a Monday, Nov. 17 appearance at the Society of Professional Economists held at Oxford University, Waller gave a speech discussing his current outlook for the American economy, in which he endorsed an interest rate cut of 25 basis points at the next Fed meeting. Waller has previously taken a relatively dove-ish view of monetary policy, having dissented from a majority vote to hold interest rates back in July. Nominated to the Fed by President Trump near the end of his first term in 2020, Waller has been rumored as a possible successor to current Fed Chair Jerome Powell.
During his speech at Oxford, Waller consistently highlighted a weak labor market (currently “near stall speed,” he said) and slowing economic activity as his reasons for favoring a rate cut. Annual inflation, while hovering above the Fed’s stated goal of 2%, is now the less-pressing concern of the Fed’s dual mandate of price stability and maximum employment, in Waller’s view. To that end, he framed an interest rate cut as an act of “risk management” for the economy.
On the economic activity front, Waller pointed to the example of “near record low” housing affordability and claimed current mortgage rates, which have fallen to around 6%, still remain discouragingly high for consumers relative to previous years.
“While home-price increases have slowed recently and even declined in some parts of the U.S., prices rose significantly in the previous few years. That is especially true for lower value homes, which is making it harder for first-time buyers to enter the market,” said Waller.
Waller said he sees no factors that “will cause an acceleration of inflation” on the economic horizon. He characterized tariffs, which fellow Fed Governor Lisa Cook has claimed are increasing inflation, as more of a one-off boost to prices and so “not likely to be a source of persistent inflation.” He also tied tariffs to labor market declines; earlier this year, firms were “eating the tariffs” by cutting the labor costs, “now I’m hearing the same story on AI (investment),” Waller explained.
Waller noted that AI firms, while generating large gains in the stock market, account for only a small portion of actual employment. He said AI will create jobs “in the medium term,” but those benefits have not yet materialized.
As for his labor projections, Waller said he expected that, when revisions for job-growth measurements during summer 2025 are made, they will likely show there was negative employment growth during this period. This reiterates a prediction he previously made during an appearance on CNBC in October.
During the speech, Waller noted signs of an “eye-popping” number of corporate job cuts and projections, based on a survey of large employers, that 2026 could be the worst job market for new college graduates since the height of the Covid-19 pandemic in 2021.
“I hear this all the time, nobody has trouble hiring. Plenty of people applying, no problems. Meanwhile, job postings by Indeed continued to drift lower in October,” Waller said. He argued the weak labor market is a sign of weakening demand for labor from employers, more so than any reduction in labor supply. For instance, Waller noted, if only supply was falling, that would put upward pressure on wages, something that the data doesn’t show has happened.
On the topic of economic activity, Waller cited the University of Michigan Consumer Sentiment survey as a likely omen. The survey has currently been showing drops in consumers’ outlook on the economy as it has before previous recessions.
The recently concluded government shutdown, Waller noted, also “lasted longer than many expected,” and this was likely a drag on economic growth. However, he disagreed with any claims that hold-ups in economic data reports compiled by government agencies will affect the Fed’s decision-making ability.
“Despite the government shutdown, we have a wealth of private- and some public-sector data that provide an imperfect but perfectly actionable picture of the U.S. economy,” Waller affirmed.
Concluding his speech by circling back around to his argument for a rate cut, Waller said in summation: “I worry that restrictive monetary policy is weighing on the economy, especially how it is affecting lower- and middle-income households. A December cut will provide additional insurance against an acceleration in the weakening of the labor market and move (monetary) policy toward a more neutral setting.”
For Waller’s full speech, click here.
