Federal Reserve's Waller says a strong February employment report may lead to a pause in rate cuts

Investing.com - Federal Reserve Board Member Christopher Waller stated that if February employment data shows continued improvement in the labor market after an unexpectedly strong January, he will consider maintaining interest rates at the March Federal Reserve meeting.

In January, 130,000 jobs were added, which Waller described as a “surprise beyond expectations” in a speech at the National Business Economics Association meeting. He said that if February data shows similar strong performance, “my view on appropriate monetary policy may lean toward pausing rate cuts at the upcoming meeting.”

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Waller previously voted against a 25 basis point rate cut at the January Fed meeting, citing soft employment growth and concerns about rising unemployment. He described his decision in March as “a coin flip,” depending on the February employment report to be released on March 6, which will be published before the Fed’s March 17-18 meeting.

The board member attributed current inflation pressures mainly to import tariffs imposed by the Trump administration and expects price pressures to ease as businesses complete adjustments to tariffs. A recent Supreme Court ruling overturned most of the new tariffs, though Waller said this “is unlikely to have a significant impact on the direction of monetary policy.”

Waller stated that he believes the core inflation rate, excluding the impact of tariffs, is close to the Fed’s 2% target, allowing him to focus on employment conditions. He noted that determining whether January’s job growth truly reflects a recovery in the labor market or will be revised downward with soft February hiring data is a challenge.

The Fed official acknowledged weak job creation in 2025 but pointed out that economic activity has exceeded expectations. He projects GDP growth of about 2% from the fourth quarter of 2024 to the first quarter of 2025, supported by solid consumer spending and a recovery in industrial activity.

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