US Fed chair contender backs October rate cut

President Donald Trump, who is mulling who to nominate to replace outgoing Fed chair Jerome Powell, has criticized the bank for moving too slowly to cut rates and boost growth.

The Fed has a dual mandate from Congress to act independently to tackle both inflation and employment, and seeks to balance the two by either hiking or cutting its benchmark lending rate.

"Tariffs have modest effects on inflation, but with underlying inflation close to our goal and expectations of future inflation well anchored, I believe we are on track toward the FOMC's 2 percent goal," Waller said, referring to the rate-setting Federal Open Market Committee (FOMC). 

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

"Based on all of the data we have on the labor market, I believe that the FOMC should reduce the policy rate another 25 basis points at our meeting that concludes October 29."

At the last rate decision in September, Fed policymakers voted overwhelmingly to cut the bank's rate by a quarter percentage-point to between 4.00 and 4.25 percent, and penciled in an average of two additional rate cuts of the same size in the last two meetings this year, in both October and December. 

Waller's comments Thursday indicate his support for at least one additional cut this year. 

But he also insisted that he would look to see if strong economic growth cools to match the softer labor market, or whether the labor market picks up to match strong growth instead, before deciding on another rate cut.

Cooling growth would support another cut, while doing so if the labor market strengthens could would risk reigniting inflation. 

"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's Treasury Secretary Scott Bessent has been tasked with finding a replacement for Powell, with Waller emerging as a top contender, alongside several other current and former Fed officials, a top White House economic advisor, and a BlackRock C-suite executive, according to US media reports.

Also Thursday, Fed Governor Stephen Miran who -- like Waller -- was nominated by Trump, said he still backed a larger half-point cut later this month.

Speaking in Washington on the sidelines of International Monetary Fund and World Bank annual meetings, Miran said moving by just 25 basis points at a time, as markets expect, would be moving "more slowly than it needs to be."

Futures traders see a roughly 92 percent chance of another 50 basis points of cuts before the end of the year, according to CME Group data.

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