Federal Reserve Governor Waller Says Monetary Policy Still Restricting Economy

09:35 AM EST, 01/30/2026 (MT Newswires) -- The current stance of monetary policy is still restraining economic growth and requires more reduction in the policy rate, Federal Reserve Governor Christopher Waller said Friday in a statement explaining his dissent in favor of a 25-basis point rate cut at this week's Federal Open Market Committee meeting.

"I dissented at the most recent meeting of the Federal Open Market Committee after concluding that cutting the policy rate by 25 basis points was the appropriate stance of policy," Waller said. "Three cuts to the policy rate last year have moved it closer to a neutral setting but monetary policy is still restricting economic activity, and economic data make it clear to me further easing is needed."

Waller noted that the labor market is still soft, with the unemployment rate higher than in mid-2026 and payrolls growth "very weak" even before expected downward revisions next week.

"Employers are reluctant to fire workers, but also very reluctant to hire," Waller said. "I have heard in multiple outreach meetings of planned layoffs in 2026. This indicates to me that there is considerable doubt about future employment growth and suggests that a substantial deterioration in the labor market is a significant risk."

At the same time, Waller sees the tariff effects on inflation to be temporary and should be disregarded as inflation expectations remain well anchored, adding that inflation outside the tariff effects is close to the FOMC's 2% goal.

"With total inflation excluding tariff effects close to our target at just slightly above 2% and a weak labor market, the policy rate should be closer to neutral, which the median FOMC participant estimates is 3%, and not where we are - 50 to 75 basis points above 3%," Waller said. "I favored reducing the policy rate to strengthen the labor market and guard against a deterioration that would be harder to address once it has begun."

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