Federal Reserve governor Christopher Waller said Monday that solid job gains reported for January could shift the case for whether the central bank cuts its benchmark interest rate at its March meeting. Waller tied his policy outlook to what comes next in the labor market data, indicating the Fed could either keep rates steady or proceed with a cut depending on the next monthly jobs report.
Waller spoke at a conference hosted by the National Association for Business Economists, describing two plausible paths for the Fed as closely matched. He said that if February’s jobs report again points to a labor market improving enough to reduce downside risks, it “may be appropriate” for the Fed to hold its short-term rate at current levels while waiting to see further inflation progress and continued labor strength.
But if the data in February weaken—if good job news from January is later revised downward or “evaporates” in the February report—Waller said a cut would be warranted at the March meeting. “As things stand today, I rate these two possible outcomes as close to a coin flip,” Waller said, according to the account of his remarks.
The comments marked what Waller described as a notable shift from January, when he had been one of the two Fed governors to dissent against keeping the Fed’s key rate steady after three rate cuts at the end of last year. In that earlier decision, the Fed left its short-term rate at about 3.6%, creating a renewed debate over how quickly the central bank should pivot as the labor market and inflation evolve.
Waller said the January hiring pickup itself might not necessarily reflect a sustained trend. Employers added a more-than-expected 130,000 jobs in the January report, he said, but he added that this kind of gain could represent a one-time move. He said he would want to see similarly positive numbers in the next report before concluding that the labor market—described as very weak in 2025—is truly improving.
Beyond the near-term policy decision, Waller also addressed the economic backdrop that has puzzled some economists: the economy’s growth appearing relatively solid while hiring last year was limited. He said he expects that even the small hiring gains that were reported earlier this month for last year may be revised to below zero, and he described difficulty in making sense of an economy growing with zero job growth. He said he thinks hiring could pick up in 2026 and resolve that contradiction.
Waller also offered another possibility for the disconnect, suggesting that higher productivity could explain why output grew without comparable employment gains. In that view, firms could have learned—after the pandemic—how to produce more with fewer workers, reducing the need for new hiring even as activity expanded.
The federal policy debate is also occurring amid political pressure on the Fed, with Waller’s remarks coming after President Donald Trump attacked the central bank following the government’s revised estimate of economic growth for the final three months of last year. The growth rate was revised down to an annual rate of 1.4% from 4.4% in the fall, according to the report of Trump’s criticism.
Waller said he was not expecting tariffs to alter his view on rates in a major way, while acknowledging uncertainty created by how tariffs might be reimposed. He said the Supreme Court’s decision to strike down many of Trump’s tariffs would likely have only limited economic and inflation impact, and he added that the ruling could improve “spending and investment,” though he said the magnitude and duration remained unclear.
He also noted that the White House is seeking to reimpose tariffs using other laws, which he described as creating “considerable uncertainty” about whether tariffs will continue in practice. That uncertainty, he suggested, is part of the environment the Fed will have to monitor as it decides whether to adjust borrowing costs—rates that, in general, can affect mortgage, auto loan, and business borrowing over time even as financial markets also shape actual rates.
The policy lever for Waller, however, remained the labor-market data coming in between now and March. He suggested that if downside risks to jobs have diminished, the Fed could wait; and if the job-market picture deteriorates or fades from revisions, he said a cut should follow.