Christopher Waller, seen as Powell’s likely successor, says weakening labor market justifies immediate easing—even as Fed hawks warn inflation is still too high
MARKET INSIDER – A powerful voice inside the U.S. Federal Reserve has publicly broken ranks. Christopher Waller—one of the Fed’s most influential governors and a leading candidate to succeed Jerome Powell—said he supports cutting interest rates at the Fed’s upcoming December meeting, signaling an intensifying split over how to balance stubborn inflation with a labor market that appears to be stalling.
Speaking in London, Waller said his reading of the data pushed him to back rate cuts at both the October and December meetings, arguing the Fed must “manage risk” as job growth cools and economic momentum fades. The Fed has already cut rates twice this year—each time by 0.25 percentage points—after a summer marked by weakening hiring and softer wage gains.
Waller warned that the labor market is “still weak and near stall speed,” while September inflation data showed only a “relatively small” impact from tariff-related price pressures. Inflation expectations, he added, remain stable—giving policymakers room to ease.
His remarks, however, sharply contradict the stance of several hawkish members of the Federal Open Market Committee. Boston Fed President Susan Collins, Kansas City Fed President Jeff Schmid, and Fed Vice Chair for Supervision Michael Barr argue inflation remains uncomfortably high at 3%, and that the economy continues to show “unexpected resilience.” Powell himself cautioned after the October cut that a December reduction “is not a foregone conclusion.”
Waller pushed back, saying that even when adjusting for distortions caused by the prolonged government shutdown—during which official data releases were halted—U.S. growth has likely cooled “in the second half of 2025 compared with the rapid pace of Q2.”
Adding nuance to the debate, Fed Vice Chair for Monetary Policy Philip Jefferson said the central bank still has “room to cut” because labor-market risks “tilt to the downside.” But he warned that the lack of updated data and shifting trade-offs between inflation and employment mean the Fed should proceed cautiously.
The rare public divergence among senior Fed officials underscores the stakes heading into December. With growth slowing, inflation sticky, and official data clouded by the shutdown, Powell faces one of the most uncertain policy calls of his tenure.
The outcome may redefine the Fed’s leadership—and signal whether the central bank is prioritizing the fight against inflation or the need to shield an increasingly fragile labor market.
