Fed chair contender backs October rate cut, cites cooling inflation

WASHINGTON: A top contender to lead the US Federal Reserve has backed a quarter-point rate cut later this month, saying inflation is easing and attention should shift to the weakening labour market.

Fed Governor Christopher Waller said on Thursday (Oct 16) that with inflation close to the bank’s target, the focus should now be on slowing job growth and signs that employment may already be contracting.

“Tariffs have modest effects on inflation, but with underlying inflation close to our goal and expectations well anchored, I believe we are on track toward the Fed’s 2 per cent goal,” Waller said in New York.

“As a result, my focus is on the labour market, where payroll gains have weakened this year and employment may well be shrinking already,” he added.

WALLER BACKS 25-BASIS-POINT CUT

Waller said he supports another 25-basis-point reduction at the Federal Open Market Committee (FOMC) meeting that concludes on Oct 29.

At its last decision in September, the Fed voted overwhelmingly to lower its benchmark rate by a quarter point to a range of 4.00 to 4.25 per cent, and signalled two further cuts this year, one in October and another in December.

“Based on all of the data we have on the labour market, I believe the FOMC should reduce the policy rate another 25 basis points,” Waller said.

He also stressed that future moves would depend on how quickly economic growth cools. “What I would want to avoid is rekindling inflationary pressure by moving too quickly and squandering the significant progress we have made taming inflation,” he said.

TRUMP WEIGHS SUCCESSOR TO POWELL

President Donald Trump, who has repeatedly criticised the Fed for moving too slowly to support growth, is deciding who will succeed outgoing chair Jerome Powell.

Treasury Secretary Scott Bessent has been tasked with identifying candidates, and Waller is seen as a leading contender, along with several current and former Fed officials, a senior White House economic adviser, and an executive from BlackRock, according to US media reports.

DIFFERING VIEWS WITHIN THE FED

Also on Thursday, Fed Governor Stephen Miran, another Trump nominee, said he still supports a larger half-point cut this month.

Speaking in Washington on the sidelines of the IMF and World Bank annual meetings, Miran said cutting by just 25 basis points, as markets expect, would mean moving “more slowly than it needs to be.”

Futures markets currently price in a 92 per cent chance of another 50 basis points of cuts before the end of the year, according to CME Group data.