24 Nov 2025
Fed Governor Waller Highlights Consequences of A Quart-Point Rate Cut
Recent information suggests that the U.S. job market continues to exhibit signs of weakness, which may lead the Federal Reserve to consider implementing another quarter-point interest rate cut during its upcoming meeting on December 9-10. Fed Governor Christopher Waller shared these insights on Monday, emphasizing that the decision to take further action will largely depend on a significant influx of economic data as U.S. statistical agencies work to catch up on reports that were delayed due to the recent government shutdown.
Waller noted that since the last Federal Reserve meeting, most private sector reports and anecdotal evidence indicate that the labor market remains "soft" and continues to show signs of deterioration. He also mentioned that inflation is anticipated to decrease, which could justify a rate cut in December. However, he cautioned that the situation may become more complex in January when a substantial amount of economic data is expected to be released.
If this data aligns with the current trend of a weakening labor market and low inflation, it could support the case for further rate cuts. On the other hand, if the data reveals a sudden uptick in inflation or job growth, it could raise concerns about the appropriateness of continuing to lower interest rates.
The Federal Reserve is currently facing a divided stance among its officials regarding the potential for another rate cut at the December meeting. However, recent comments from key policymakers have shifted market expectations significantly in favor of a quarter-point reduction.
This uncertainty is compounded by the fact that the Fed will be operating with limited information at this meeting, as government statistical agencies are still addressing the backlog of work resulting from the 43-day government shutdown that concluded on November 14.
Notably, the Bureau of Labor Statistics has announced that it will not release a jobs report or consumer inflation data for October. Additionally, the reports for November will not be available until after the Federal Reserve's meeting, further complicating the decision-making process. In the absence of these critical data releases, Fed officials are increasingly relying on information from private sources and their own networks within businesses and households across the nation.
To aid in this data-gathering effort, the Federal Reserve compiles information into a document known as the Beige Book, which is released two weeks prior to each Federal Reserve meeting. The next edition of the Beige Book is scheduled for release on Wednesday, and it is expected to provide valuable insights into current economic conditions as reported by various districts.
As the Federal Reserve navigates these uncertain waters, it is crucial to consider the broader implications of its monetary policy decisions. Interest rate cuts can stimulate economic activity by making borrowing cheaper, which in turn can encourage spending and investment. However, if the labor market shows signs of recovery or inflation begins to rise unexpectedly, the Fed may need to reassess its approach to ensure that it does not inadvertently contribute to overheating the economy.
Moreover, the ongoing challenges in the job market highlight the need for targeted fiscal policies that can address structural issues within the economy. For instance, investing in workforce development and training programs could help equip workers with the skills needed for emerging industries, thereby enhancing job prospects and supporting economic growth.
In conclusion, while the Federal Reserve is contemplating another rate cut in December, the decision will ultimately depend on a wealth of forthcoming data. As the economy continues to evolve, it will be essential for policymakers to remain vigilant and responsive to changing conditions, balancing the need for economic stimulus with the risks associated with inflation and market stability.
The upcoming Beige Book report and subsequent data releases will play a critical role in shaping the Fed's strategy as it seeks to navigate these complexities in the U.S. economy.
