Fed Governor Waller urges caution for now, says rate cuts possible later in the year

Federal Reserve Governor Christopher Waller on Friday expressed caution about current economic conditions but still sees the opportunity for interest rate cuts later this year. Previously an advocate for rate cuts, Waller said in a CNBC interview that recent developments in the labor market as well as the uncertainty of the war with Iran require a more conservative approach. "It doesn't mean that I'm going to stay put for the rest of the year," Waller said on " Squawk Box ." "I just want to wait and see where this goes, and if things go reasonably well and the labor market continues to be weak, I would start advocating again for cutting the policy rate later this year." Markets have almost completely doused the chance of rate reductions through the balance of 2026 and well into 2027. That's a switch from expectations prior to the war, when traders had been looking for two or three cuts this year. But soaring oil prices and an indeterminate time frame over how long the war will last have changed market expectations and caused a rethinking from Waller and other policymakers. Waller had dissented in January from a Federal Open Market Committee decision not to cut, but went along with the majority earlier this week for another pause. watch now VIDEO 3:34 03:34 How the Iran war, tariffs and inflation are impacting the Fed Economy His earlier dovish position was motivated by a clearly weakening labor market , which produced nearly no net job growth in 2025. However, he noted Friday that the labor force also is not expanding, so "net zero" growth is still leaving the unemployment rate unchanged, even with a 92,000 drop in nonfarm payrolls in February. "If we get another 90,000 jobs decline in the next jobs report, that'll be like four negative reports out of five. To me, that's not zero. So at that point, you need to start thinking about this labor market isn't good," Waller said. "I don't think this war is going to help in any way going forward, but we'll have to see what...