'September big cut' possibility left open by Waller, a candidate for next Fed chair

Dissenting opinion arguing for rate cuts at the July FOMC as well

"High possibility of additional cuts over the next 3~6 months"

Christopher Waller, a Federal Reserve (Fed) governor, suggested that if a clear weakening of the labor market is confirmed this month, he could support a 'big cut' (benchmark interest rate 0.5% point cut) at next month's Federal Open Market Committee (FOMC) meeting.

In a speech to the Miami Economic Club on the 28th (local time), Governor Waller said, "Based on the data gathered so far, I do not think a larger rate cut than (0.25%) will be necessary in September," but added, "If the August jobs report to be released next month indicates that the economy has weakened substantially and inflation is well contained, my view could change." This was interpreted as a remark that also left open the possibility of a 0.5% point cut.

Earlier, the July jobs report released by the U.S. Department of Labor on the 1st showed that nonfarm payrolls increased by only 73,000 month-on-month, far below market expectations (100,000). Governor Waller stressed, "It is time to ease monetary policy and move interest rates toward a more neutral level," adding, "Additional rate cuts are expected over the next 3∼6 months."

Governor Waller and Vice Chair Michelle Bowman voiced dissent arguing for cuts at the July FOMC meeting when the decision was to keep rates unchanged, citing labor market concerns. Both were appointed by President Donald Trump and have been mentioned as potential successors to Chair Jerome Powell, whose term ends in May next year.

Reporter Im Day-yeon allopen@hankyung.com