Federal Reserve Governor Waller said on Monday that if the upcoming February employment data shows that the U.S. labor market has 'turned towards a more solid state' after a weak performance in 2025, then he is open to maintaining interest rates at the Fed's March meeting.
Waller stated in his speech prepared for the National Association for Business Economics conference that the increase in new jobs in January was unexpectedly strong, reaching 130,000, which is considered 'above expectations.' If this trend continues in February, 'my view on appropriate monetary policy may lean towards pausing action at the upcoming meeting.'
"But if the positive news from the January job market is revised or disappears in February, this would support my stance at the last FOMC meeting that a 25 basis points rate cut is appropriate and should happen at the March meeting," he added.
Waller had voted against the decision to keep rates unchanged at the January Fed meeting, stating that given the weak job growth and the perceived risk of rising unemployment, a further 25 basis points rate cut was appropriate.
At that time, he was still among the candidates for Fed chair considered by President Trump, who has consistently called for significant rate cuts from the Fed. Subsequently, Trump nominated Kevin Warsh to take over after Fed Chair Powell's term ends in May.
The January government employment report came in much better than expected, with the US economy adding jobs at a steady pace and the unemployment rate dropping.
Waller expressed welcome for the positive data, but also voiced concerns that this data 'might be more noise than signal,' particularly as revisions in the report also show that net job additions for 2025 are nearly zero. He noted that this indicates a 'weak' and 'fragile' job market in 2025.
For him personally, the stance on a rate cut or keeping rates unchanged in March is like 'flipping a coin'.
Regarding inflation, which is more concerning for some policymakers, Waller stated that he believes the current rise in inflation is largely driven by the import tariffs from the Trump administration. As businesses complete their adjustments to the related tax burdens, inflation is likely to recede.
The US Supreme Court ruled last Friday, dismissing most new tariffs, which adds uncertainty to the situation, but Waller stated that this is 'unlikely to have a significant impact on the monetary policy path.'
He indicated that currently, after excluding the lagging effects of tariffs, inflation levels are likely close to 2%, which shifts his focus back to the state of the job market.
The employment data for February will be released on March 6, ahead of the Fed's meeting on March 17-18.
Previously, the staunch rate cut advocates, a Trump ally, and Fed governor Stephen Miran retracted his call for significant rate cuts this year. In an interview last week, he mentioned that the latest data shows the US economy performing stronger than he had previously expected.
