Federal Reserve governor Christopher Waller said Monday that whether the central bank cuts interest rates at its next meeting in March may hinge on how quickly the jobs picture changes after a strong January report. Speaking at a conference of the National Association for Business Economists, Waller said solid job gains in January could mean the Fed can “skip a rate cut” in March, but he also cautioned that February’s labor data would matter for deciding whether that strength persists.
Waller said last month’s hiring pickup—when employers added more than 130,000 jobs—might be only a one-time gain. He said he would need to see another similarly positive report next month to conclude that the job market, which he described as very weak in 2025, is improving in a sustained way. He framed the two possible paths—cutting or not cutting—as “close to a coin flip,” with “As things stand today, I rate these two possible outcomes as close to a coin flip,” he said.
The remarks also contrasted with Waller’s posture in January, when he was one of the two Fed governors who dissented against holding the key rate steady after three rate cuts at the end of last year. That decision left the Fed’s short-term rate at about 3.6%, a level Waller said the Fed could keep if the jobs data show downside risks to labor have diminished.
Waller said the Fed’s rate cuts, when they happen, can eventually translate into lower borrowing costs for households and businesses, even though mortgage, auto and business loan rates also reflect moves in financial markets. He used that framework to describe the conditions under which the Fed might hold rates at current levels and monitor progress on inflation along with labor market strength.
He also took up the economics of tariffs after the Supreme Court struck down many of President Donald Trump’s tariffs. Waller said the ruling would likely have only a limited impact on inflation and the economy and therefore would not change his view on rates. He said the decision could have “a positive impact on spending and investment,” but he added that “how large the impact may be and how long it could last is unclear,” citing uncertainty about what follows.
Waller said the White House is seeking to reimpose the tariffs using other laws, and he called that approach a source of “considerable uncertainty over to what extent tariffs will continue.” In that context, he tied tariff uncertainty to the Fed’s need to keep its policy path responsive to the data rather than to a single legal outcome.
Waller also addressed a question that economists have raised about the economy’s mix of relatively solid growth alongside weak hiring through much of last year. He said he expects that meager gains reported earlier this month for last year will eventually be revised to below zero, even as he suggested hiring could pick up later this year and resolve the contradiction. He also cited a potential explanation involving productivity gains—stemming from the pandemic—where companies may have learned to produce more with fewer workers.
The developments came as Trump criticized the Fed after the government reported that economic growth slowed in the final three months of last year compared with the summer and fall. In the reporting, Trump posted “LOWER INTEREST RATES,” and added a comment referencing what he has previously called Fed Chair Jerome Powell, using a misspelling in the post.