Waller votes against again: Fed's interest rate cut policy faces internal disagreements

Federal Reserve Board Member Waller issued a statement on January 30, expressing a cautious attitude toward the direction of Fed policy. During the most recent FOMC meeting, Waller voted against the decision, believing that a 25 basis point rate cut was too aggressive. This stance reflects disagreements within the Fed decision-making circle regarding the current economic outlook.

Policy Divisions in the FOMC Meeting

Although Waller was unable to prevent the rate cut, his voting position represents another voice within the Federal Reserve. Three rate cuts have already been implemented last year, bringing the policy rate closer to what the Fed considers the neutral rate. Waller’s concern is that, despite the adjustment in interest rates, the current monetary policy still exerts a certain degree of restraint on economic activity.

The Complex Equation of Inflation and Employment

Waller’s analysis focuses on the current state of two core economic indicators. After excluding the impact of tariffs, the overall inflation rate has approached the Fed’s 2% target, slightly above the expected goal. At the same time, there are clear signs of weakness in the labor market. Against the backdrop of relatively stable inflation and a weakening employment market, Waller supports lowering the policy rate to support the labor market.

Preventive Thinking to Avoid Economic Deterioration

Waller emphasizes a key risk management logic: once signs of economic deterioration appear, it will become more difficult to control. This forward-looking policy consideration reflects his concern for downside risks to the economy. He believes that, although the urgency of taking action now may not be as great as expected, proactively lowering interest rates to prevent economic deterioration remains a wise policy choice.