Fed Governor Waller says he would support a 25-basis-point reduction in March if January labour strength is revised away or evaporates but may be appropriate to hold if downside labour market risks have diminished

Policy bias / rate signal

Waller says he dissented in January and favoured another cut
Waller says he did this because job gains slowed and downside risks to employment increased amid somewhat elevated inflation
Waller says he favoured another cut in January to bring policy rate closer to a neutral setting
Waller says balance of risks in January were weighted toward further policy easing

Forward guidance

Waller says it may be appropriate to hold policy rate at current levels if downside labour risks have diminished
Waller says it would support a 25-basis-point reduction in March if January labour strength is revised away or evaporates
Waller says he will need to see the February report due March 6 before forming any judgment on labour rebound
Waller says before March 17-18 meeting he will get February employment and inflation data, plus job openings and retail sales
Waller says February CPI on March 11 and February labour report will be important basis for his judgment on proper policy stance
On March, Waller says he rates the two possible outcomes as close to a coin flip.

Tariffs / trade policy

Waller says appropriate policy should look through tariff effects on inflation
Waller says tariff increases have not affected longer-term inflation expectations and will only temporarily boost inflation
Waller says Supreme Court ruling overturning a large share of import tariffs may have a positive impact on spending and investment
Waller notes Administration plans to reimpose at least some tariffs using other laws
Waller says he will look through tariffs if they come down
Waller says Supreme Court ruling is unlikely to have a significant impact on his view of appropriate policy stance

Labour market

Waller says January employment report came in substantially stronger than he and most forecasters and market participants expected
Waller notes initial estimate is economy created more jobs in January than previous nine months combined.
Waller says 2025 was extraordinarily weak for job creation, weakest outside a recession since 2002
Waller notes revised 2025 job gains of 181,000, averaging 15,000 a month
Waller says payroll employment probably fell in 2025, only third year since 1945
Waller says decline in net immigration last year significantly lowered labour force growth
Waller says unemployment fell last month but is still higher than a year ago
Waller says he has concerns jobs report may contain more noise than signal
Waller says job gains were concentrated primarily in health care and construction
Waller notes ADP reported 22,000 jobs; Revelio estimated 3,000 new private-sector jobs in January
Waller notes Challenger Gray and Christmas counted 108,000 layoff announcements last month

Inflation

Waller notes headline CPI inflation came in below expectations for January
Waller says core CPI inflation rose 0.3 percent in January and was up 2.5 percent over 12 months
Waller estimates January PCE inflation around 2.8 percent over 12 months, with core about 3 percent
Waller says PCE inflation has crept up in past few months and is meaningfully above 2 percent goal
Waller estimates underlying inflation without tariff effects is close to 2 percent goal

GDP growth

Waller notes advance estimate of Q4 2025 real GDP growth of 1.4 percent annual rate
Waller notes private domestic final purchases increased 2.4 percent
Waller expects real GDP to grow above 2 percent over six months after smoothing shutdown effects
Waller notes PCE growth slowed from 3.5 percent in Q3 2025 to 2.4 percent in Q4

Balance of risks

Waller says risk of substantial downturn in labour market combined with limited risk of higher inflation warranted another cut in January
Waller says key to setting appropriate policy will be his view of the labour market