Federal Reserve Governor Christopher Waller says the U.S. economy may finally be softening enough to justify a key shift in monetary policy next month. After nearly two years of high interest rates, Waller indicated that a rate cut in December is now a reasonable option, citing growing evidence of a cooling labor market and slowing economic momentum.
Speaking at an event on Monday, Waller noted that hiring has eased significantly across several sectors, wage growth is moderating, and job openings continue to fall. These trends, he argued, reflect a job market that is losing strength faster than expected—an environment in which tighter monetary policy may no longer be needed.
For the Federal Reserve, the state of the labor market is a major deciding factor in determining whether rate cuts are appropriate. Waller said recent employment data suggests the economy is moving closer to a balance between supply and demand for workers, but that the adjustment has been accompanied by signs of strain. Slower hiring and reduced job turnover point toward weakening confidence among employers.
Inflation remains above the Fed’s 2% target, but progress has been steady. Waller emphasized that cooling price pressures, paired with a softer job market, strengthen the case for lowering interest rates to support economic stability.
Market expectations have shifted sharply in recent weeks. Investors are increasingly convinced that the Fed will cut rates at least once before the end of the year, with some anticipating more reductions in early 2026. Treasury yields fell following Waller’s remarks, while equity futures climbed as traders factored in a more supportive policy outlook.
The governor said policymakers will be closely evaluating incoming employment reports, wage indicators, and consumer spending patterns before the December meeting. A rate cut, he said, should only proceed if data continues to confirm a downshift in economic activity without signs of renewed inflation pressure.
Waller’s comments mark one of the clearest signals yet that the Federal Reserve is preparing to pivot after a prolonged battle against inflation. With borrowing costs at their highest levels in decades, households and businesses have faced rising financial strain, making a case for relief stronger as growth slows.
If the Fed follows through with a December cut, it would represent a notable policy shift heading into 2026—one aimed at preventing a sharper downturn while still maintaining progress in the inflation fight. For now, policymakers appear cautiously optimistic that the economy can be guided to a softer landing, provided the labor market continues to cool at a manageable pace.
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