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 further interest rate cuts are necessary to return the benchmark rate to a neutral level, but emphasized that there is no need to accelerate monetary easing.

Christopher Waller, Fed Governor.

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

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

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

These remarks came after the Fed cut the benchmark rate by 0.25 percentage points for the third consecutive time on the 10th, adjusting it to 3.5-3.75% per annum. This view contrasts somewhat with the statement by New York Fed President John Williams, who said that the current interest rate has already reached a neutral level.

On the 15th, President Williams stated, "The Federal Open Market Committee (FOMC) has shifted the previously somewhat restrictive monetary policy stance to a neutral level," adding, "This move puts us in a more advantageous position as we head toward 2026." In contrast, 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 demonstrates that differences of opinion within the Fed regarding the appropriate rate level are widening, as slowing employment and persistently high prices coexist.

Waller, who is also considered a candidate for the next Fed chair, is scheduled to have an interview with U.S. President Donald Trump later this afternoon.

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