Federal Reserve Governor Waller: There is room for further interest rate cuts, but there is no need to rush to act

The Zhitong Finance App learned that Federal Reserve Governor Waller said that as inflation continues to slow down, the Fed has room to further lower interest rates to return monetary policy to a “neutral” position, but there is currently no need to rush to act.

In an interview on Wednesday, Waller outlined a scenario where inflation will continue to cool down until 2026, and pointed out that the current monetary policy stance is still clearly tight. He estimated that the federal funds rate level is still at most about 100 basis points higher than the neutral interest rate.

“Since inflation is still high, we can take it slow; there is no need to drop rapidly,” Waller said. “We can steadily and gradually lower the policy interest rate to near a neutral level.”

This is Waller's first public statement since the Federal Reserve cut interest rates for the third time in a row last week. The interest rate resolution was the first time since 2019 that three officials voted against it, and objections came from different factions of policy positions, highlighting the deepening differences within the Federal Open Market Committee (FOMC). At the same time, there have also been minor adjustments in the wording of the policy statement, which suggests that the uncertainty among officials about when interest rates will be cut next has increased.

Notably, Waller is currently being viewed as one of the potential candidates for the next Federal Reserve Chairman and is expected to have an interview with US President Trump later on Wednesday. When asked about this, Waller quipped that “I heard that too.”

When talking about political factors, Waller emphasized that he will resolutely defend the independence of the Federal Reserve and resist any political pressure from the White House. “I'm definitely willing to do this. I spent 20 years studying and defending the independence of central banks and their importance, and I have left a lot of research and records in this regard.”