Bloomberg Talks Fed Gov. Waller Talks Dissent, US Fiscal Policy
Oct 16, 2025
Federal Reserve Governor Christopher Waller delves into the importance of Fed communication, highlighting how differing views help clarify decision-making. He discusses the role of dissent in reflecting independent opinions and reveals insights about the labor market's shifting dynamics. Waller also addresses the potential impacts of AI on jobs, the significance of fiscal policy for interest rates, and the importance of a 2% inflation target for accountability. Additionally, he touches on the Fed’s district structure, which captures diverse regional perspectives.
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Immigration Masks Labor Weakness
- Current low net immigration masks falling labor demand, making unemployment look lower than it would be otherwise.
- Waller estimates unemployment might be nearer 5% if labor force participation had not declined.
Where Neutral Policy Might Be
- Neutral policy rate (r-star) is Fed's reference for neither stimulating nor contracting the economy.
- Waller cites the SEP median near 3%, implying about 125bp to reach neutral from current rates.
QT Restored Reserves, Composition Still Off
- The Fed has restored ample reserves after QT but must now correct balance sheet composition distorted by QE.
- Waller says the level is right but adjusting maturity structure will take time.