Waller said he’s also “open-minded” about the potential for a bigger rate cut and would advocate for one if appropriate, according to prepared remarks he’s set to deliver Friday at the University of Notre Dame in Indiana.

“The balance of risks has shifted toward the employment side of our dual mandate,” Waller said, adding that “policy needs to adjust accordingly.”

“The current batch of data no longer requires patience, it requires action,” he said.

The yield on two-year Treasuries declined after Waller’s remarks were released. Pricing in futures markets signaled investors boosted bets the Fed will lower rates by a half point this month, and they now expect at least a full percentage point in easing by the end of 2024.

US central bankers are scheduled to gather on Sept. 17-18 when the Federal Open Market Committee is widely expected to lower interest rates. Fed officials have held rates at their highest level in a generation for more than a year — a stance triggered by a burst of inflation that followed the Covid-19 pandemic.

Waller spoke just hours after the release of another disappointing employment report. Employers added fewer jobs than expected in August, Bureau of Labor Statistics showed. They also revised down the number of jobs added in July and June. The unemployment rate ticked down to 4.2% from 4.3% in July, reflecting a reversal in temporary layoffs.

Earlier this week, a separate report showed US job openings fell in July to the lowest since the start of 2021 and layoffs rose, consistent with other signs of slowing demand for workers.

“The data that we have received in the past three days indicates to me that the labor market is continuing to soften but not deteriorate, and this judgement is important to our upcoming decision on monetary policy,” Waller said. He said it is likely that a “series of reductions will be appropriate,” and that he is “open-minded about the size and pace of cuts.” 

Waller said he would advocate for “front-loading rate cuts if that is appropriate,” though incoming data will determine the size and pace. 

The Fed governor said he saw no evidence the economy is slowing into a recession, though it is “important to start the rate-cutting process at our next meeting.”

“If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings,” Waller said. “If the data suggests the need for larger cuts, then I will support that as well.”

Waller sounded in line with Fed Chair Jerome Powell who has warned that a slowdown in the labor market is now “unmistakable” and said “further weakening” would be “unwelcome.”

In an interview on CNBC Friday, Chicago Fed President Austan Goolsbee said an estimated probability of recession around 20% sounded about right, but added, “I’m concerned that if we’ve maintained this level of restrictiveness, coupled with some of these warning signs, that that percentage might be rising.”

The US economy continues to show surprising momentum even with interest rates that economists believe are significantly restrictive. Growth expanded at a 3% annual rate in the second quarter, and economists surveyed by Bloomberg forecast the pace to log in at 2.5% for the year.

Inflation rose 2.5% in the 12 months ending in July. Monthly readings, however, show a significant slowdown in price increases.

New York Fed President John Williams said in earlier remarks Friday to the Council on Foreign Relations that it is “now appropriate to dial down the degree of restrictiveness” in policy as the economy moves back into better balance.