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Federal Reserve Board Governor Christopher Waller emphasized on Thursday the need for a series of rate cuts over the next six months.

In prepared remarks delivered at the Economic Club of Miami, Florida, Waller said, “I anticipate additional cuts over the next three to six months, and the pace of rate cuts will be driven by the incoming data.” 

He, however, viewed that monetary policy hasn’t fallen “substantially” behind the curve. “But one way to signal that I don't intend to allow that to happen is to talk about where we go after September.”

The Fed governor said he does not think a cut larger than 25 basis points is needed in September, although adding that the view could change if the August jobs report showed a substantial weakening of the economy.

The CME FedWatch Tool, which factors in the expectations of futures traders, now puts the odds of a 25-basis-point cut at 86.2% and those for a pause decision at 13.8%.

Waller was among the two members of the Federal Open Market Committee (FOMC) who dissented at the July rate-setting meeting at which the central bank decided to hold fire.

On Thursday, the Fed official reiterated his July argument that the rate-setting committee shouldn’t wait until the labor market deteriorates before the central bank cuts rates, stating that the downside risks to the labor market have increased.

Waller also noted that economic activity had slowed significantly in 2025 compared to 2024, and that evidence pointed to a continuation of sluggish growth.

Advance GDP data released on Thursday showed that the U.S. economy rebounded by a stronger-than-expected 3.3% in the second quarter, primarily boosted by a decline in imports as Trump tariffs weighed on trade

The market has remained resilient through the headwinds. The SPDR S&P 500 ETF (SPY), an exchange-traded fund (ETF) that tracks the S&P 500 Index, and the Invesco QQQ Trust (QQQ) have risen 11.38% and 13.18%, respectively, for the year.

On Stocktwits, retail sentiment toward the SPY ETF remained ‘bullish’ (63/100) by late Thursday but the message volume dropped to ‘low’ levels.  Sentiment toward QQQ ETF remained ‘bearish’ and the message volume reduced to ‘low’ levels.

On inflation, Waller said that Fed forecasters have extracted the impacts of tariffs on prices and found that the underlying inflation continues to run close to the Fed’s 2% target. According to the Fed Governor, the three affected parties — exporters, importers, and consumers — will share the costs roughly equally. 

“Most forecasts are for 12-month inflation to continue to slowly increase for a couple more months, with monthly tariff effects dissipating by early 2026,” Waller said. “I believe that monetary policy should look through the tariff effects on inflation.”

The central bank official saw the need for an immediate rate cut. “With underlying inflation close to 2%, market-based measures of longer-term inflation expectations firmly anchored, and the chances of an undesirable weakening in the labor market increased, proper risk management means the FOMC should be cutting the policy rate now,” he said.

The monetary policy flux occurs at a time when the central bank and Fed Chair Jerome Powell are facing intense political pressure to lower rates, and the central bank’s independence is being challenged. Earlier this week, President Donald Trump ordered the resignation of Lisa Cook, Waller’s compatriot, on the grounds that she committed accounting fraud.

The FRB is already depleted following the premature resignation of Adriana Kugler, and Trump has nominated his economic adviser Stephen Miran as her replacement. Reports suggest that he could be confirmed before the September meeting, scheduled for Sept. 16-17.

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