Decisionmaker highlights potential shift in central bank's risk assessment
Federal Reserve governor Christopher Waller said Monday he would advocate for an interest rate cut at the December Federal Open Market Committee (FOMC) meeting, prioritizing labor market weakness over persistent inflation concerns.
The statement came during a Fox Business Network interview where Waller emphasized a shift in the central bank's risk assessment.
"My concern is mainly labor market, in terms of our dual mandate. So I'm advocating for a rate cut at the next meeting," Waller said. He added that the Fed will likely need a "meeting-by-meeting approach" starting in January as new economic data becomes available.
Waller's position carries particular weight among mortgage professionals given the Fed's significant influence on borrowing costs. His comments pushed market expectations for a December cut higher, with futures contracts now pricing in roughly a 78% probability of a rate reduction at the Fed's December 9-10 policy meeting, according to CME FedWatch data.
The Fed governor pushed back against inflation concerns, noting that recent price data had improved from earlier expectations.
"Inflation is not a big problem with the labor market weak," he said. However, he acknowledged risks ahead: January will be "tricky with a flood of data coming" that could alter the calculus, including delayed employment and inflation reports due mid-December.
Waller signaled skepticism about near-term labor market improvement, stating he doesn't expect a turnaround "in the next six weeks to eight weeks" and noting that anecdotal evidence suggests firms aren't planning hiring sprees.
While Fed president John Williams recently signaled openness to a December cut, other FOMC members including Lorie Logan and Susan Collins have indicated that holding rates steady may be appropriate, citing inflation concerns.
Fed board member Stephen Miran, a Trump appointee, said he would support a smaller 25-basis-point December rate cut if the vote is close, rather than the 50-basis-point reduction he typically favors.
Treasury yields fell Friday as the Federal Reserve's policy rift widened, with New York Fed president John Williams signaling openness to another rate reduction while regional counterparts urged restraint before year-end.https://t.co/zQkoPosT39
— Mortgage Professional America Magazine (@MPAMagazineUS) November 21, 2025
The divergence reflects broader uncertainty about the path forward, which will shape mortgage rates and lending decisions through 2026. For lenders and brokers, Waller's emphasis on data-dependent decisions suggests continued volatility in rate expectations through year-end.
Waller also noted he recently met with Treasury secretary Scott Bessent regarding a possible nomination as Fed Chair, positioning himself as a candidate to potentially influence monetary policy for years to come.
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