Fed’s Waller: ‘Let’s Get On with’ Inflation

Federal Reserve Governor Christopher J. Waller used a Thursday night speech at the Economic Club of Miami to press, yet again, for easier money. Declaring that “the time has come to ease monetary policy and move it to a more neutral stance,” the long-time dove said he would have cut rates in July and plans to vote for a 25-basis-point trim at the September 16–17 Federal Open Market Committee (FOMC) meeting. Traders hardly blinked; futures already penciled in the move and give “significant odds” to one or two more reductions before year-end. Meanwhile, gold briefly touched $3,422 an ounce, a reminder that hard assets tend to stir when central bankers reach for the stimulus lever.

Waller revealed he had been alone in arguing for a quarter-point cut at the July gathering, asserting that subsequent data “confirm that was the right call.” With the policy rate sitting at 4.25 %–4.50 %, he estimates it is still 1.25–1.50 percentage points above the longer-run “neutral” rate of 3 %. “Based on what I know today, I would support a 25 basis point cut,” he reiterated, adding that anything larger would require an unforeseen collapse in next week’s payroll report. Markets got the message: odds of a September cut jumped to nearly 90 %, according to CME FedWatch.

Soft economic numbers supplied the rationale. Real GDP grew only 1.2 % annualized in the first half, and Waller conceded that incoming indicators “point to continued sluggish activity.” Payroll figures, after hefty downward revisions, show gains of just 35,000 jobs a month since May, and the governor warned the September 9 benchmark could even reveal outright contraction. Private-sector hiring averaged a meager 52,000 during the same stretch, and forthcoming adjustments may erase another 60,000 per month. The headline 4.2 % unemployment rate, he cautioned, “may be masking weakening demand in the labor market.”

Inflation, though eased from last year’s peaks, remains sticky. Twelve-month PCE inflation is running at 2.6 %, with the core gauge still hovering at 2.9 %. Fed staffers argue that stripping out temporary tariff effects puts underlying inflation “close to the FOMC’s 2 percent target,” and Waller believes policymakers should “look through the tariff effects.” Skeptics counter that tariffs seldom vanish cleanly and that once the Fed begins to loosen, rekindled price pressures could follow. Thursday’s jump in gold—within a brisk $22.7 intraday range—suggests many investors prefer an ounce in the hand to promises of price stability down the road.

Waller signaled more easing is likely: “Additional cuts over the next three to six months” are on the table, provided the labor market does not implode beforehand. With markets already anticipating fresh liquidity and Washington still running hefty deficits, savers confront the familiar prospect of negative real yields. Sound-money advocates argue that repeated rate cuts without meaningful spending restraint amount to little more than slow-motion currency debasement.

If Waller gets his wish, the Fed could be back in full accommodation mode before year-end—hardly comforting for those wary of inflation’s staying power. For now, all eyes turn to next week’s jobs report and the September FOMC, while the glittering price of gold keeps whispering its own verdict on the Fed’s “neutral” ambitions.

Receive SchiffGold’s key news stories in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.

Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!