Waller: Non-farm data dominates March Federal Reserve rate cut decision, PCE exceeding expectations adds variables
Federal Reserve Governor Christopher Waller issued a statement from Washington, stating that his support for a rate cut in March depends primarily on the upcoming February non-farm payrolls report. Waller confirmed that non-farm payrolls increased to 130,000 in January, higher than the market expectation of 65,000, but emphasized that “a good month of data does not constitute a trend” and is not sufficient to confirm that the labor market is on a solid recovery path.
Waller’s Statement: A Conditional Framework for Rate Cuts or Pauses
In his statement, Waller clearly outlined policy tendencies under two scenarios:
Conditions supporting a Fed rate cut in March: If the February non-farm payrolls report shows continued weakness in the labor market or if the January data is revised downward, Waller indicated he would support a 25 basis point rate cut.
Conditions for supporting a pause in rate cuts: If the February employment data shows a clear improvement in the labor market and inflation continues to move closer to the 2% target, he may support maintaining interest rates unchanged.
Waller also pointed out that job growth for the full year of 2025 was “unusually weak,” the weakest year since 2002 outside of recession periods. He emphasized that although January’s employment data was better than expected, it has not altered the overall assessment of this background.
At the January Federal Open Market Committee (FOMC) meeting, Waller publicly voted against rate cuts. His conditional statement this time indicates that he remains open to new data rather than holding a preset stance.
Key Data Schedule: Three Important Reports Before the March FOMC
Ahead of the FOMC meeting on March 17-18, the market should closely monitor the following three reports:
| Data | Release Date | Market Focus |
|---|---|---|
| January Producer Price Index (PPI) | February 27 | Assessing upstream inflation pressures |
| February Non-Farm Payrolls | March 6 | Waller’s explicitly specified key decision basis for rate cuts |
| February Consumer Price Index (CPI) | March 11 | Confirming overall inflation trend |
Based on current data, last week’s release of January PCE inflation data exceeded market expectations: headline PCE rose to 2.9% (expected 2.8%), and core PCE rose to 3% (expected 2.9%). Following the data release, CME Group’s FedWatch tool showed that the market now prices in a 96% probability that the FOMC will keep rates unchanged in March, with only a 4% chance of a rate cut.
The Fed’s Overall Stance: Multiple Officials Favor Inflation Priority
Waller’s statement is not isolated. The latest FOMC minutes reveal that several participants indicated they might support rate hikes if inflation remains persistently above 2% and shows no clear signs of improvement.
Fed Chair Lorie Logan and Beth Hammack have recently expressed cautious views on inflation, stating they will not support further rate cuts until inflation clearly moves closer to the target.
The consensus among these officials indicates that the Fed’s current policy discussion has shifted from “timing of rate cuts” to “data threshold confirmation,” with the February non-farm payrolls report being the key variable that will determine the March policy direction.