Waller: Strong February Jobs Could Let the Fed Pause

With input from the Federal Reserve, the Wall Street Journal, Bloomberg, Reuters, and Market Watch.

Federal Reserve Governor Christopher Waller said he’s open to hitting the brakes on rate moves at the Fed’s March meeting — but only if February’s jobs numbers show the labor market really has steadied. If instead the jobs report comes in weak, Waller said he’d be ready to back a 25-basis-point cut in March.

Waller laid out the trade-offs in remarks to the National Association for Business Economics. He called January’s payrolls surprise — 130,000 new jobs — “a surprise to the upside,” and said if that strength carries into February his view on policy “may tilt toward a pause” at the March 17–18 meeting. But he was clear: one good month doesn’t make a trend. If February erases the January pop, he’d return to his earlier view that another cut is warranted.

Why this matters: Waller has been one of the more dovish votes at the central bank recently. He dissented from the FOMC’s decision to hold rates in January, arguing then that downside risks to employment and weak hiring in 2025 made another quarter-point cut appropriate. Now he’s essentially put that position on hold, saying new labor and inflation data will decide whether he switches to a pause or presses to ease.

A few other nuggets from his talk:

• Tariffs and inflation: Waller said recent tariff moves pushed measured inflation higher, but he thinks that effect is temporary. Strip out tariff-driven price changes and “underlying inflation” looks to be close to 2%, he said — the Fed’s long-run target. That’s why he wants to “look through” tariff noise when setting policy.
• Data timing: The February jobs report lands on March 6, giving the Fed a fresh read before the March meeting. Waller said he’ll weigh that alongside February CPI/PCE prints and other activity indicators.
• Signal vs. noise: He flagged reasons to be skeptical of the January surprise: sector concentration (health care and construction drove most gains), conflicting private payroll measures like ADP, and the history of downward revisions to initial payrolls. All that means January may be more noise than signal.
• Outlook split: His bottom line: right now it’s roughly a coin flip — the economy could be showing a genuine turn, or we could be looking at a string of noisy monthly reports that disguise lingering weakness.

Waller’s stance is a useful reminder of how finely balanced Fed choices are right now. Inflation, minus tariff blips, looks nearer to target; the labor market is the swing variable. A clean February jobs print that confirms January’s strength gives officials cover to pause and watch; a weak February hands the doves an argument to cut.

Either way, markets and policymakers are braced for a busy six weeks: key employment and inflation releases, the Fed meeting, and more data that will determine whether the central bank sits tight or eases into spring.