Waller Says Fed Rate Is 1% Point Above Neutral, Stresses Gradual Cuts

Remarks at CNBC Forum
"Inflation Remains High... No Need to Rush Rate Cuts"

Fed Governor Christopher Waller stated that up to an additional 1 percentage point cut in the benchmark interest rate is needed to return it to a neutral level, but emphasized that there is no need to accelerate monetary easing.

Christopher Waller, Fed Governor.

On the 18th (local time), Governor Waller said at a CNBC forum, "Since inflation remains high, we can take our time and there is no need to rush rate cuts," expressing this view.

He explained that the current benchmark interest rate of 3.5-3.75% per year is up to 1 percentage point higher than the neutral rate. The neutral rate is a theoretical level that neither restrains nor stimulates the economy.

Governor Waller presented a scenario in which inflation continues to slow through 2026, stressing that "we can gradually lower the policy rate to the neutral level."

These remarks come after the Fed cut the benchmark rate by 0.25 percentage points for three consecutive times on the 10th, adjusting it to 3.5-3.75% per year. This contrasts somewhat with New York Fed President John Williams, who recently stated that the current rate has already reached the neutral level.

President Williams said on the 15th, "The Federal Open Market Committee (FOMC) has adjusted the previously somewhat tight monetary policy stance to a neutral level," adding, "This move puts us in a more favorable position as we head toward 2026." In contrast, Governor Waller's perception of the appropriate rate is closer to that of Fed Governor Stephen Miran, who believes "the current rate is still excessively high."

This highlights the growing divergence within the Fed regarding the appropriate level of interest rates, as slowing employment and still-elevated prices coexist.

Governor Waller, who is also being mentioned as a candidate for the next Fed Chair, is scheduled to have an interview with President Donald Trump later this afternoon.

When asked about the independence of the Fed, he stated, "I have studied central bank independence and its importance for 20 years," and added, "There is a rich record of this," making it clear that he intends to uphold the Fed's independence.