Federal Reserve Governor Waller: CEOs say AI will lead to massive layoffs, March interest rate decision depends on February labor data

On Monday, Federal Reserve Governor Christopher Waller stated in a prepared speech for the National Association for Business Economics event in Washington that whether he will support a rate cut at the next Federal Reserve policy meeting will depend on the upcoming labor market data. Waller said:

If the February labor market data shows, like January's, that the downside risks to the labor market have diminished, then maintaining interest rates at the Federal Open Market Committee (FOMC) meeting on March 17-18 may be appropriate.

But if the strong labor market data from January is revised down or disappears in February, that would support my position at the last FOMC meeting—that a 25 basis point cut in the policy rate is appropriate and should be implemented at the March meeting.

Waller voted against the decision to keep the benchmark policy rate unchanged in January, stating that he was more inclined to support a 25 basis point cut due to signs of weakness in the labor market. The subsequently released January employment report was much better than expected, with the U.S. economy adding jobs at a robust pace and the unemployment rate declining.

Waller stated, “Assuming underlying inflation continues to show we are close to the 2% target, the key to setting appropriate policy will depend on my assessment of the labor market. As it stands, I believe both possibilities are nearly equally likely.”

Waller expressed welcome for the positive employment data in January but also expressed concern that it contained “more noise than signal,” particularly since the data revisions in the report showed that net job additions in 2025 are close to zero. He said this indicates a “weak” and “fragile” job market in 2025.

Waller pointed out that companies are beginning to cut staff after over-hiring. CEOs have indicated that artificial intelligence will lead to significant layoffs. The weak labor market conditions may persist. The job market appears to have a demand issue rather than a supply issue, and he still believes the labor market is weak and fragile.

The U.S. Bureau of Labor Statistics is expected to release the February employment report on March 6.

Waller reiterated that when assessing inflation, he would exclude the impact of former President Donald Trump's trade policies. “I estimate that the underlying inflation I refer to, which excludes tariff impacts, is close to the 2% target set by the FOMC.”

Waller also stated that the Supreme Court's ruling last Friday to overturn most of the tariffs imposed by Trump under emergency powers is unlikely to have a significant impact on his views regarding how the Federal Reserve should formulate policy