Waller of U.S. Fed Says "Rate Should Be Cut by 0.25%P to Address Labor Slowdown"... Myron Calls for 'Big Cut'

Waller: "To avoid mistakes, cut rates by 0.25 percentage points and observe"
'Trump associate' Myron: "Rates should be cut by 0.25 percentage points three times this year"

Christopher Waller, a member of the U.S. Federal Reserve Board, stated on October 16 (local time) that the benchmark interest rate should be cut by 0.25 percentage points this month in response to the slowdown in the labor market. In contrast, Steve Myron, a Fed board member and close associate of former President Donald Trump, advocated for a 0.5 percentage point cut, commonly referred to as a "big cut."

Christopher Waller, Member of the U.S. Federal Reserve Board. Photo by Reuters Yonhap News

In an interview with Bloomberg TV that day, Waller said, "If you don't want to make a mistake, the way to avoid it is to proceed cautiously and carefully with a 0.25 percentage point rate cut and observe what happens," adding, "Afterwards, we will have a better idea of what to do next."

He explained that there is a conflict in policy judgment between strong economic growth and a weakening labor market.

Waller stated, "Something has to give," explaining, "Either economic growth slows to match the weak labor market, or the labor market recovers to match the strong economic growth." He continued, "Because it is impossible to know which direction the indicators related to this conflict will develop, we must move more cautiously when adjusting the policy rate," emphasizing, "We must avoid mistakes that would be costly to correct."

Recently, Federal Reserve Chair Jerome Powell also reiterated concerns about the weakening labor market, leaving the door open for additional rate cuts. On October 14, Powell said, "The labor market has revealed significant downside risks," and added, "The indicators we received following the July meeting showed that the labor market has indeed weakened considerably. This suggests that the balance of risks between price stability and full employment has become closer." While he did not make direct comments regarding the future path of interest rates, his remarks were interpreted as leaving open the possibility of further cuts.

Last month, the Federal Open Market Committee (FOMC) cut the benchmark interest rate by 0.25 percentage points, adjusting it to an annual range of 4.0 to 4.25 percent. The FOMC will decide whether to implement an additional cut at its upcoming meeting on October 28-29.

In contrast, Myron once again called for a 0.5 percentage point rate cut. He particularly emphasized the need for a swift rate cut, citing increased economic downside risks due to the U.S.-China trade conflict.

Myron warned, "If monetary policy remains as restrictive as it is now and such shocks hit the economy, the negative impact will be substantially greater." He went on to argue that a 0.5 percentage point rate cut should be implemented at the FOMC's regular meeting at the end of this month.

However, he also noted that the Fed is likely to limit itself to a 0.25 percentage point cut this month, as it did in September, adding, "The Fed should cut rates by 0.25 percentage points three times before the end of this year."