Hold your breath! A Federal Reserve Governor is making waves, demanding an immediate interest rate cut to save the labor market from further decline. He’s not mincing words about the urgent need for action. Will his call for a September cut be answered, or are we heading for more economic uncertainty? Find out what’s really happening behind the scenes!

Federal Reserve Governor Christopher Waller has forcefully advocated for a 25 basis point reduction in interest rates this September, openly urging his colleagues on the Federal Open Market Committee (FOMC) to “get on with it.” His plea underscores growing concerns about the trajectory of the US economy and the increasing signs of weakness within the labor market, positioning his call as a crucial intervention to prevent further deterioration.

Delivering a pivotal speech at the Economic Club of Miami, Waller detailed his conviction that the FOMC should have initiated a quarter-percentage-point cut during its July meeting. He highlighted that mounting evidence across economic activity, the labor market, and inflation data unequivocally supports a shift towards a more neutral monetary policy setting, away from the current restrictive stance maintained by the central bank.

Waller meticulously articulated that achieving a neutral interest rates environment would entail a significant adjustment, specifically 125 to 150 basis points lower than the present federal funds rate, based on the median estimates of FOMC participants. This substantial gap illustrates the urgency he feels in recalibrating the nation’s economic throttle to foster stability without reigniting inflationary pressures.

Both Governor Waller and Fed Vice Chair for Supervision Michelle Bowman notably cast dissenting votes against maintaining steady rates in July, signaling their preference for an immediate reduction. With the FOMC’s next critical meeting scheduled for September 16 and 17, following Federal Reserve Chair Jerome Powell’s recent acknowledgment of a possible near-term rate cut, the pressure for decisive action on monetary policy is palpably mounting.

Despite his fervent push for easing, Waller expressed cautious optimism during his speech, stating he remains “hopeful” that a timely adjustment to interest rates can avert a more severe decline in the labor market while simultaneously guiding inflation back to the Fed’s mandated 2% target. However, this hope is tempered by significant apprehension regarding the true health of the job market, which he fears may be considerably weaker than previously estimated.

His concerns are largely fueled by a disheartening trend of weak job creation observed over the past several months. Waller pointed out that while a single month’s data doesn’t constitute a trend, three consecutive months of poor job creation data — with private-sector jobs averaging only 52,000 from May to July after revisions, roughly half the rate of the first quarter of 2025 — paint a stark picture. He attributed this softening labor demand partly to ongoing uncertainty surrounding tariff policy and its chilling effect on hiring, alongside freezes in some entry-level positions.

Further addressing critical aspects of the US economy, Waller also turned his attention to the reliability and quality of monthly payroll data provided by the Bureau of Labor Statistics. He underscored the profound importance of this data for an accurate assessment of the labor market, suggesting there is “room for improvement” in its collection and reporting methodologies.

Waller clarified that while the overall quality of employment data, particularly in terms of response rate, remains sound, slower response times from businesses contribute to initial reports being “noisier” and more susceptible to revision. This necessitates a more nuanced approach to interpreting near-month payroll figures, advising that a comprehensive understanding of the labor market should be built upon several months of results and a broader array of other indicators.