Fed's Waller Calls March Rate Cut a 'Coin Flip'
Federal Reserve Governor Christopher Waller described the likelihood of a March interest rate cut as a "coin flip", citing a strong U.S. jobs report and persistent inflation. His comments followed new data from the New York Fed showing inflation measures heated up in December, complicating the case for imminent monetary easing. Policymakers are now adopting a "wait-and-see" approach, signaling that interest rates may remain higher for longer.
- This represents a shift in tone for Governor Waller, who dissented at the Federal Open Market Committee's (FOMC) January meeting because he favored a 25-basis-point rate cut. - The strong jobs report influencing his latest comments revealed that U.S. payrolls increased by 130,000 in January, significantly beating estimates of 55,000, while the unemployment rate unexpectedly fell to 4.3%. - The current federal funds rate, which would be the subject of a potential cut, is in a target range of 3.50% to 3.75%. This level was set after three consecutive quarter-point rate cuts in late 2025. - The Federal Reserve's official long-term inflation goal is 2%, measured by the annual change in the Personal Consumption Expenditures (PCE) price index. The central bank has been operating under an "average inflation targeting" framework since August 2020, allowing inflation to run moderately above 2% to make up for periods when it was lower. - Governor Waller stated that his decision at the upcoming March 17-18 FOMC meeting will depend on whether the February labor market data confirms the strength seen in January. - The January decision to hold rates steady was the first pause after three consecutive cuts in the final meetings of 2025. The vote was 10-2, with Governor Stephen Miran joining Waller in dissenting in favor of a cut.
