Federal Reserve Governor Christopher Waller has delivered his strongest case yet for a shift in U.S. monetary policy, urging the central bank to begin cutting interest rates at its September meeting and continue easing over the following months.
His remarks underscore a growing conviction within the Fed that inflation is no longer the primary obstacle and that the risks to the labor market now warrant more proactive support.
Waller’s comments mark a clear departure from the cautious stance that has defined much of the Fed’s approach this year. Speaking Thursday, he argued that inflation has effectively returned to the Fed’s 2% target, while employment dynamics suggest more fragility beneath the surface than headline job numbers reveal. The combination, in his view, justifies moving away from restrictive policy sooner rather than later.
“The data on both inflation and the labor market indicate that a shift is appropriate,” Waller said. “I favored a rate cut at the July meeting, and the subsequent economic releases have confirmed that decision was the right call. Based on what I know today, I would support a 25 basis point cut at the September 16–17 meeting.”
This push comes after the Federal Reserve left rates unchanged at 4.25%–4.50% for five consecutive meetings, despite repeated public pressure from President Donald Trump for more aggressive easing. Waller’s speech suggests that the consensus may be turning in his direction, particularly as risks tilt away from overheating inflation and toward economic slowdown.
For wealth advisors and RIAs, Waller’s framing signals a notable pivot. The Fed is acknowledging that inflationary pressures tied to tariffs and trade policy are likely to be temporary, and therefore do not justify keeping borrowing costs higher than necessary. In Waller’s words, “It is important that the FOMC not wait until such a deterioration [in the labor market] is under way and risk falling behind the curve in setting appropriate monetary policy.” His concern is that if policymakers remain on hold too long, a weakening economy could spiral more quickly than expected, leaving the Fed with fewer tools to respond effectively.
Chair Jerome Powell has consistently argued that rates should remain elevated to guard against the risk of renewed inflation. The Fed’s bias throughout much of the past year has leaned toward caution, especially given that inflation remained above target for four consecutive years. But Waller’s comments reinforce the argument that the central bank has already accomplished much of its inflation-control mandate, and the greater threat now lies in allowing restrictive policy to choke off labor market resilience.
From an advisor’s perspective, the implications are significant. A confirmed rate-cutting cycle beginning in September would likely reset fixed income dynamics, support credit-sensitive sectors, and provide relief across rate-sensitive parts of the economy, including housing and commercial real estate. Duration exposure in client portfolios, which has been challenged during the higher-for-longer period, could regain relevance if the Fed begins signaling a steady path toward neutral rates.
At the same time, equity markets may respond favorably in the short term, but the driver behind rate cuts—weakening labor conditions—should give advisors pause. Waller’s remarks suggest the Fed sees meaningful downside risks to employment and economic momentum, which could introduce greater volatility ahead. For clients, that means balancing enthusiasm for potential rallies with realistic expectations about earnings growth and consumer demand.
Waller’s dismissal of tariff-driven inflation as “temporary” also carries planning implications. Advisors will need to consider whether short-term price volatility from trade disruptions could unsettle clients, even if the Fed remains steadfast in looking through those effects. The central bank appears confident that such pressures do not warrant higher sustained rates, but markets may not always share that patience.
The key takeaway is that the Fed may finally be preparing to pivot decisively from its defensive posture. For advisors, this environment calls for a reassessment of portfolio positioning:
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Reviewing fixed income allocations with an eye toward duration and credit quality.
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Preparing clients for both the near-term boost of easing and the underlying reasons for the shift—slowing growth and softer labor markets.
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Monitoring equity valuations in light of potential downward revisions to corporate earnings if economic weakness accelerates.
As the September meeting approaches, Waller’s comments serve as a strong signal that momentum is building toward cuts. The question now is not whether easing will begin, but how quickly the Fed will move once it does. Advisors will need to be ready to guide clients through a more dynamic policy environment—one where opportunity and risk are likely to rise in tandem.
