Fed's Waller: Time has come to move US interest rates lower — Reuters

FXStreetAug 28, 2025 11:13 PM

Federal Reserve (Fed) Governor Christopher Waller said that he would support an interest-rate cut in the September meeting and further reductions over the next three to six months to prevent the labor market from collapsing, Reuters reported late Thursday.

Key quotes

The time has come to move policy to a more neutral stance.
Would support 25 bps cut at Fed’s September meeting.
Anticipates additional rate cuts over next 3–6 months
Don’t believe a bigger September cut is needed, unless August jobs report shows substantial weakening and inflation stays well-contained.
Wanted rate cut in July, feels more strongly about it now.
Policy rate is ‘moderately restrictive,’ estimated at 1.25 to 1.50 percentage points above neutral.
Underlying inflation, factoring out temporary effect of tariffs, is close to 2%.
Labor demand is weakening, and that is not good.
Downside risks to labor market have increased.
No set sequence on how fast to cut rates.
We know we are going toward neutral, just a question of how fast we get there.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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