Waller's "coin flip" style rate cut decision: Everything depends on February employment data

Federal Reserve Board member Waller recently stated that the decision to either cut rates in March or keep rates steady is as uncertain as “flipping a coin.” He emphasized that the true decision-making power does not lie with the Federal Reserve but depends on the upcoming February employment data. This comment clearly reflects the current dilemma faced by the Fed in policy formulation.

Employment Data as a Key Policy Variable

Waller’s remarks imply that the actual performance of the labor market will directly determine the Fed’s next move. Economic data, especially employment indicators, have become the most critical factors influencing expectations of rate cuts. This not only highlights the importance of employment to the overall economy but also indicates that the current economic situation is quite uncertain, requiring the latest data for informed judgment.

March Policy Decision Depends on Data

In other words, if February employment data shows strong performance, it may support the Fed maintaining rates. Conversely, weaker data could open the door to rate cuts. Waller’s statement sends a clear signal to the market: whether to cut rates or not entirely depends on the objective performance of the labor market. The Fed will not base its policy decisions on other factors. This data-driven approach to decision-making reflects the Fed’s transparency and also reminds investors to closely monitor the upcoming employment reports.