Fed official sends bold 5-word message on September interest rate cuts

Your household budget could start to see some relief from high interest rates soon.

Federal Reserve Governor Christopher J. Waller has stepped up his call that the central bank begin cutting interest rates at its September meeting.

Hes also signaling that the Federal Open Market Committee should begin a series of reductions over the next several months that lead into even more cuts next year.

What the Federal Open Market Committee does

• Monetary Policy Arm of the Fed: The FOMC is the policy-making body of the Federal Reserve that sets the direction of U.S. monetary policy.
• Interest Rate Decisions:The FOMC decides whether to raise, lower, or hold the Federal Funds Rate, directly influencing borrowing costs for consumers and businesses.
• Economic Goals: Its dual mandate from Congress is to promote maximum employment and stable prices, with a secondary goal of moderating long-term interest rates.
• Meeting Schedule: The committee meets eight times a year in Washington, with emergency meetings possible during times of financial stress.
• Membership:The panel has 12 voting members, including the Feds seven governors, the president of the New York Fed, and four of the other 11 regional Fed bank presidents on a rotating basis.

Powell opened the door to interest rate cut in September

The FOMC has taken a cautious “wait and see” approach to interest rate cuts, balancing signs of easing inflation with concerns about a slowing labor market.

Fed Chair Jerome Powell, speaking Aug. 23 at the Fed‘s annual Jackson Hole symposium in Wyoming, emphasized that while inflation is close to the central bank’s 2% target, policymakers must weigh risks of moving too quickly.

Powell signaled flexibility, noting the Fed would respond to new data as it is released rather than lock in a preset course.

The FOMC last cut the funds rate in December.

It has been tracking the expected inflationary impact of the largest U.S. tariffs in 90 years imposed by President Donald Trump.

This has led to a barrage of criticism from the White House.

A frustrated President Trump and his allies have demanded a substantial 3.0% cut in interest rates to avoid stagflation and to lessen interest rates on the nations debt.

Waller on rate cut: “Let's get on with it”

Waller, who dissented in July alongside Governor Michelle Bowman when the Fed opted to hold rates steady at 4.25% to 4.50%, said the recent revisions to job-creation figures further validate those earlier calls for easing.

“Since my July speech, economic data have reinforced my judgment that the time has come to ease monetary policy,” he said.

“While I believe we should have cut in July, I am still hopeful that easing monetary policy at our next meeting can keep the labor market from deteriorating while returning inflation to the FOMC's goal of 2%. So, let's get on with it.” — Fed Gov. Christopher Waller

Waller repeated his call for a 0.25% interest rate cut at the Sept. 17 FOMC meeting and added that the Fed should consider further decreases in the coming three to six months, dependent on incoming data.

“Inflation is running near the Feds 2% goal once temporary tariff effects are stripped out,” Waller said. “Proper risk management means the FOMC should be cutting the policy rate now.”

Waller said that weak payroll numbers, large downward revisions to prior job-growth figures, and soft underlying demand signal rising downside risks to the labor market.

But wait, theres more to consider about Fed interest rate cuts

Waller cautioned that the size of the September adjustment could be revisited depending on the Labor Departments August employment report, due Sept. 4.

If the data point to a sharper economic decline while inflation remains contained, he said, his stance could shift.

Wallers comments came the day before the Commerce Department released the Personal Consumption Expenditures (PCE) figures for July, which showed that core PCE remained steady at 2.9%.

TheStreet Pro veteran trader Chris Versace said that while the PCE figure for July was in line with expectations, “it clearly shows inflation pressures are building.”

If the Sept. 4 jobs report and other economic data show stronger job creation and higher inflation pressure, Versace said “the market will need to revisit the high expectations it has for a September rate cut.”

There‘s an 86.9% chance of a 0.25% cut in the Federal Funds Rate in September, according to the widely watched CME Group’s FedWatch tool