Federal Reserve Governor Waller pushes for September interest rate cuts Other officials are still cautious

The Federal Open Market Committee (FOMC) meeting of the Federal Reserve on September 16-17 is approaching, and internal differences over whether to cut interest rates are becoming more and more obvious. The Zhitong Finance App learned that Federal Reserve Governor Waller clearly stated on Wednesday that he supports interest rate cuts initiated at this month's meeting and hopes to implement multiple interest rate cuts within the next three to six months. However, many other senior Federal Reserve officials tend to be patient and continue to observe changes in economic data.

In an interview, Waller said bluntly: “I have always made it clear that I think we should cut interest rates.” He pointed out that the labor market is showing signs of slowing down, and the Federal Reserve should take early action to prevent the job market from deteriorating rapidly.

“Once the labor market deteriorates, it usually comes very fast and doesn't happen slowly.” Waller said, “Therefore, I think we need to start cutting interest rates at the next meeting.” He added that interest rates may be cut continuously for the next three to six months, “maybe every other meeting, or even every meeting.”

Waller stressed that he is not worried that tariffs will trigger continued inflation, but more worried about a sudden turn in the labor market. He expects tariffs to slow down economic growth, but not cause the economy to fall into recession: “I don't think there will be a recession, but growth will slow down because tariffs are essentially taxes, and taxes are generally bad for growth.”

Despite Waller's tough stance, some officials remain cautious. St. Louis Federal Reserve Chairman Mussalem said in his speech at the Peterson Institute for International Economics that the current labor market is still close to full employment. Although risks have increased, there are no signs of a sharp rise in layoffs.

“I expect the labor market to gradually cool down and remain close to full employment, but the risk is biased downward.” Mussalem said. He warned that if layoffs begin to increase, the labor market may deteriorate faster than in an active market.

Atlanta Federal Reserve Chairman Bostic said on the same day that he understood the concerns about the employment situation, but currently he is more inclined to think that the labor market is “gradually slowing down” rather than “collapsing.” In his opinion, cutting interest rates only once this year is a reasonable choice, but if the August non-farm payrolls report data released this Friday is very weak, he will consider supporting the September rate cut.

Currently, economists surveyed by FactSet expect the number of non-farm payrolls to increase by 90,000 in August, and the unemployment rate will remain at 4.2%. Previously, the July employment data fell far short of expectations, adding only 73,000 jobs, and the total number of new jobs added in May and June was revised down by 258,000, indicating that the rate of cooling of the job market is accelerating.

Despite weakening employment data, the Federal Reserve is still facing challenges on the issue of inflation. The personal consumption expenditure (PCE) price index rose 2.6% year on year in July, still higher than the Federal Reserve's 2% target.

Bostic emphasized, “Currently, my biggest concern is still the inflation mission. As long as the labor market cools down in an orderly and stable manner, I think we need to be cautious and not act rashly.”

Mussalem expects tariffs to push up inflation in the short term, but the impact will gradually subside in the next two to three quarters, and expects core inflation to approach 2% again in the second half of 2026. He said the current “moderately restrictive” policies are in line with a fully employed labor market and inflation levels slightly above target levels.

As differences of opinion within the Federal Reserve widened, the market paid close attention to the results of the September meeting. Waller advocates cutting interest rates early to prevent a sharp deterioration in the labor market, and does not rule out continuous interest rate cuts in the coming months; while Bostic and Mussalem tend to wait and see until the data is further clarified.

Waller stressed that the Federal Reserve does not need to cut interest rates according to a “fixed sequence” and can flexibly adjust the policy path according to economic conditions. At the same time, he said that although he is not worried that tariffs will cause long-term inflation, he understands the concerns of other officials, so he needs to wait for more data to verify.