Fed Governor Christopher Waller said today that policy remains meaningfully restrictive, estimating rates are still around 50 to 100 basis points above neutral. Despite that gap, Waller emphasized there is no rush to get down” on interest rates, arguing the Fed can move rates down to neutral “steadily” as conditions evolve.
Waller said the labor market continues to “soften”, but not in a dramatic or disorderly way. That backdrop supports a measured approach to further rate cuts, with no need for aggressive action. The Fed can proceed at a “moderate pace”. “I don’t think we have to do anything dramatic,” he added.
He also noted that the string of rate cuts delivered in the final months of 2025 has already helped offset some risks to hiring. Looking ahead, Waller said prospects for a stronger economy next year—driven by fiscal policy changes and reduced uncertainty—should further support labor demand. For him, the employment side of the Fed’s mandate remains the priority, while inflation is expected to continue easing.
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