Fed's Waller Could Support Rate Pause in March if Labor Market Improvement Continues

03:37 PM EST, 02/23/2026 (MT Newswires) -- Federal Reserve Governor Christopher Waller said Monday that continued improvement in the labor market, along with further progress on inflation, would tilt his decision toward a pause in interest rates at the central bank's March monetary policy meeting.

Waller, along with fellow Governor Stephen Miran, dissented from the majority at the Fed's meeting in January, as they both preferred to reduce rates by a quarter percentage point. At that meeting, the Federal Open Market Committee left interest rates unchanged after delivering three back-to-back 25-basis-point cuts last year amid concerns about labor market.

Official data released earlier this month showed that the US economy added more jobs than projected in January, while the unemployment rate slipped. Before their March 17-18 meeting, policymakers will have fresh economic data to assess, including the official employment and inflation reports for February.

"If these data support the idea of an improvement in the labor market in January that continued in February, along with additional progress toward 2% inflation, that could result in my outlook turning a bit more positive and my view of appropriate monetary policy may tilt toward a pause at our upcoming meeting," Waller said Monday in remarks prepared for a speech at an economic policy conference in Washington, DC.

The possibility of recent labor market data pivoting to "a more solid footing" cannot be dismissed, Waller said. However, "one month of good news does not constitute a trend, but a year does, and the year of 2025 was an extraordinarily weak one for job creation -- the weakest outside of a recession since 2002."

Waller said he would continue to call for a 25-basis-point rate reduction "if the good labor market news of January is revised away or evaporates in February."

"As things stand today, I rate these two possible outcomes as close to a coin flip," he said.

Markets widely expect the Fed to keep interest rates unchanged next month, according to the CME FedWatch tool.

Minutes from the FOMC's January meeting released last week showed that policymakers seemed divided over the projected path of interest rates as the focus shifted from labor market weakness to concerns about elevated inflation.

Earlier this month, Kansas City Fed President Jeffrey Schmid said monetary policy should remain "somewhat restrictive" to cool inflation. Dallas Fed President Lorie Logan said the current monetary policy was well positioned to respond to risks to inflation and the labor market, adding that she's more concerned about prices remaining "stubbornly high."

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