Federal Reserve Governor Waller advocates for a rate cut in September, while other officials remain cautious.

The Federal Open Market Committee (FOMC) meeting of the Federal Reserve is approaching on September 16-17, and internal divisions on whether to cut interest rates have become increasingly evident. Federal Reserve Board Governor Waller explicitly stated on Wednesday that he supports starting a rate cut at this month's meeting and hopes to implement multiple rate cuts in the next three to six months. However, several other Fed officials are more inclined to remain patient and continue to monitor changes in economic data. Waller said in an interview, "I have always been clear in stating that I believe we should cut rates." He pointed out that there are signs of a slowdown in the current labor market, and the Fed should take action early to prevent a rapid deterioration in the job market. "When the labor market turns bad, it usually happens very quickly, not gradually," Waller said. "Therefore, I think we need to start cutting rates at the next meeting." He added that there could be consecutive rate cuts in the next three to six months, "perhaps cutting rates every other meeting or even at every meeting." Waller emphasized that he is not concerned about tariffs causing sustained inflation, but is more concerned about a sudden turn in the labor market. He expects tariffs to drag down economic growth, but not lead to a recession: "I don't think there will be a recession, but the pace of growth will slow because tariffs are essentially taxes, and taxes are generally unfavorable to growth." Although Waller's stance is firm, some officials remain cautious. St. Louis Fed President Bullard said in a speech at the Peterson Institute for International Economics that the current labor market is still close to full employment, and although risks have increased, there are no signs of a significant increase in layoffs. "I expect the labor market to gradually cool down and remain close to full employment levels, but the risks are tilted to the downside," Bullard said. He warned that if layoffs start to increase, the labor market could deteriorate more quickly than in an active market. Atlanta Fed President Bostic also said on the same day that he understands concerns about the job market, but currently leans more towards believing that the labor market is "gradually slowing down" rather than "collapsing." In his view, a rate cut this year is a reasonable choice, but if the employment report for August released on Friday is very weak, he will consider supporting a rate cut in September. Currently, economists surveyed by FactSet expect the non-farm payroll employment to increase by 90,000 in August, with the unemployment rate remaining at 4.2%. Prior to this, the job data for July fell significantly below expectations, with only 73,000 jobs added, and the additional employment numbers for May and June were revised downward by a total of 258,000, indicating a faster cooling of the job market. Despite the weakening job data, the Fed still faces challenges on the inflation issue. The Personal Consumption Expenditures (PCE) price index rose 2.6% year-on-year in July, still above the Fed's 2% target. Bostic emphasized, "What I am most concerned about now is the inflation mandate. As long as the cooling of the labor market is orderly and stable, I believe we need to remain cautious and not take action recklessly." Bullard expects tariffs to temporarily raise inflation, but the impact will gradually fade in the next two to three quarters, and he expects core inflation to approach 2% again in the second half of 2026. He said that the current "modestly restrictive" policy is consistent with a labor market at full employment and slightly above-target levels of inflation. As internal disagreements within the Fed widen, the market is highly focused on the outcome of the September meeting. Waller advocates for an early rate cut to prevent a sharp deterioration in the labor market, and does not rule out consecutive rate cuts in the coming months, while Bostic and Bullard lean towards maintaining a wait-and-see approach until the data is more clear. Waller emphasized that the Fed does not need to cut rates according to a "fixed sequence" and can adjust policy paths flexibly based on economic conditions. He also said that although he is not worried about tariffs causing long-term inflation, he understands the concerns of other officials, therefore more data is needed to validate the situation.