Fed’s Waller thinks inflation will start to fall in next 3-4 months and rates can come down at moderate pace

A finalist to replace Powell sees room for 100 basis points of rate cuts

By Greg Robb

Published: Dec. 17, 2025 at 9:03 a.m. ET

Fed Governor Christopher Waller is expected to meet with President Donald Trump later Wednesday as part of the White House search for a new chair.

Federal Reserve governor Christopher Waller, who is on President Donald Trump’s shortlist to become the next Fed chair, said inflation is going to soften in the coming months, and that there is room for substantial rate cuts.

“I’m not particularly worried about it [inflation]. It’s above target, but I believe it will start coming down in the next three to four months,” Waller said during a talk at Yale University.

Waller said he is worried about the short-term outlook for the labor market, although he added that he expects job growth to strengthen next year.

Last week, the Fed cut rates for the third straight meeting, and Fed Chair Jerome Powell signaled the bar was high for further cuts. The median forecast of Fed officials is for only one rate cut in 2026.

Waller said that the current level of rates is still putting downward pressure on growth. He said the Fed could cut rates by “50 to 100 basis points” to get rates down below 3%. That’s the level that isn’t slowing growth, he said.

“We can go at a moderate pace,” Waller said, adding that he wasn’t sure his colleagues on the central bank would go along with this plan.

Many Fed officials think a neutral fed-funds rate is above 3%.

The Wall Street Journal reported that Waller will meet Trump later today as part of the White House search to replace Powell, whose term ends in May.

Betting markets think that Waller has a small chance to win the top Fed job. White House economic adviser Kevin Hassett and former Fed governor Kevin Warsh are seen as having better chances of becoming the next Fed chair, but the markets have been volatile.

Treasury Secretary Scott Bessent said Tuesday that Trump will select a new chair in January.

Partner Center

News For You

Dow Jones Futures: AppLovin, Nvidia, Palantir, Tesla Slide During Stock Market Drop

IBD

This winning fund manager spills 4 secrets about smart ways to buy non-U.S. stocks

MarketWatch

Ph.D.s Can’t Find Work as Boston’s Biotech Engine Sputters

WSJ

These stocks fell hard in 2025, but analysts see as much as 65% upside for them in 2026

MarketWatch

Home Sales, Fed Meeting Minutes, and Manufacturing Data to Usher in the New Year

Barron’s

China’s Push to Master the Arctic Opens an Alarming Shortcut to U.S.

WSJ

Go to WSJ+ DashboardExplore WSJ+ Marketplace

About the Author

Greg Robb

Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.

View this MarketWatch article CLICK HERE