He expects a rebound in the November jobs report because the Boeing strike and hurricane effects that harmed the October report are now in the past.

Washington — Federal Reserve governor Christopher Waller addressed the American Institute for Economic Research Monetary Conference on Monday, ahead of the Fed’s next policy meeting on December 17–18.

“I expect rate cuts to continue over the next year,” Waller said. He dismissed risk of “stalling” in the progress lowering inflation and said, “At present, I lean towards supporting a cut to the policy rate at the December meeting.”

Waller emphasized that could change with more data. “We’re going to get a lot of data between now and the next meeting,” he said. That includes the November jobs and inflation reports, plus other economic metrics on productivity and job openings.

Waller said he would support keeping rates constant if much of that data surprises, but as things currently stand, he would continue to support the Fed’s anticipated rate cuts.

He expects annualized economic growth to be a little slower in the fourth quarter than the 2.8 percent growth from the third quarter. He also noted a “slight deterioration in overall conditions for manufacturers for the fifth straight month.”

He said that in 2022, industries that are less sensitive to interest rates  and those that are more sensitive to rates grew at a similar pace. By 2023, when interest rate hikes had time to take effect in the economy, they had diverged. That indicated to Waller that “restrictive policy is working as it is intended to,” by raising the cost of money and cooling inflationary pressure.

Waller said he expects a rebound in the November jobs report, which will be published on Friday, because the Boeing strike and hurricane effects that harmed the October report are now in the past.

The unemployment rate has gradually increased over the past several months but remains at a low level compared with historical rates. Waller described a “looser but still strong labor market.” He said, “The number of layoffs is still low, consistent with a healthy labor market.”

He noted wage growth at around 4 percent coincident with productivity growth around 2 percent, indicating to him that inflation expectations are reasonably well anchored at 2 percent.

Waller acknowledged that progress on PCE inflation seems to be stalling. “I feel like an MMA fighter with inflation in a chokehold, waiting for it to tap out,” Waller said. But he said that based on the overall trends in the data, victory still seems inevitable.

“There’s a ways to go” until a neutral policy rate, Waller said. “The labor market appears to be in balance, and we should aim to keep it that way.”

Waller is one of twelve members of the Federal Open Market Committee, which sets the federal funds rate that sets the pace for interest rates throughout the economy. The FOMC has cut that rate by 0.75 percentage points so far this year, after having raised it by roughly 5 points to counteract post-pandemic inflation.