Fed Official Says ‘We Need To Start Cutting Rates’ as Job Openings Fall Close to 4-Year Low

A top official at the Federal Reserve and prime candidate to replace Fed Chair Jerome Powell next year has reiterated his call for an interest rate cut this month, as new data on job openings showed a weakening labor market.

Fed Gov. Christopher Waller told CNBC on Wednesday that he fully supports cutting rates when policymakers next meet on Sept. 17, noting that the central bank can remain flexible in subsequent meetings.

“When the labor market turns bad, it turns bad fast," said Waller. "So for me, I think we need to start cutting rates at the next meeting. ... I would say over the next three to six months, we could see multiple cuts coming in."

Long-term bond yields fell in the wake of Waller's interview, extending their decline after weak new labor market data. Mortgage rates typically follow 10-year Treasury yields, meaning homebuyers should see slight relief in daily rates.

Waller has called for rate cuts since July and dissented from the majority to vote for a quarter-point cut the Fed policymaker meeting that month, arguing that inflation from tariffs will be a one-off effect, and that the labor market is weaker than it appears.

Indeed, employment data released days after that last Fed meeting came in shockingly weak, revealing that 258,000 fewer jobs were created in May and June than previously reported.

On Wednesday, new Labor Department data on Job Openings and Labor Turnover (JOLTS) showed total job openings dropped in July to 7.2 million.

That was just slightly higher than a four-year low in job opening reached in September 2024, and the first time since 2021 that the number of job openings was less than the number of unemployed job seekers.

"The most recent JOLTS report suggests a softening labor market, something that the Federal Reserve takes into consideration, along with inflation data, when deciding on a target interest rate," says Realtor.com® Senior Economist Joel Berner. "Weaker employment numbers would generally prompt the Fed to lower rates and spur on business activity, but fears of rising inflation make this decision less clear."

Berner forecasts that the Fed will cut its benchmark rate by a modest quarter-point at the meeting in two weeks, as the central bank tries to balance concerns about the labor market with fears of lingering inflation.

The Fed uses higher interest rates to fight inflation, and lower rates to stimulate the economy and boost job creation. The central bank's policy rate has remained unchanged at a range of 4.25% to 4.5% since December.

Although the Fed doesn't directly set mortgage rates, those rates have hovered in a narrow range above 6.5% so far this year, adding to affordability woes for homebuyers and keeping home sales suppressed near a 30-year low.

But in recent weeks, mortgage rates have been falling in anticipation of a September cut at the Fed, with the average 30-year fixed mortgage rate falling to a 10-month low of 6.56% last week, according to Freddie Mac.

In Wednesday's interview, Waller said that the case for rate cuts could be assessed on a meeting-by-meeting basis, and that cutting rates now wouldn't force policymakers into continuing to cut at each subsequent meeting.

"We don’t have to go into a lock sequence of steps," he said. "Whether it’s like every other meeting, every meeting, we’ll have to wait and see [what] the data says."

Waller is considered one of the top candidate to replace Powell when the Fed chair's term expires next May, allowing President Donald Trump to nominate a replacement.

Trump has, for months, pressured Powell and the rest of the Federal Open Market Committee (FOMC) to lower the Fed's benchmark rate, which would juice the economy and reduce government borrowing costs.

As well, the president is currently involved in a legal battle with Fed Gov. Lisa Cook over his attempt to fire her over allegations of mortgage fraud, which appears to be an extension of his pressure campaign on the FOMC.

Trump has also accused Powell of "hurting the housing industry badly" by leaving the Fed policy rate steady, saying that "people can't get a mortgage because of him."

In a speech last month, Powell signaled his openness to lowering the benchmark rate this month, saying the "balance of risks" in the economy was shifting away from inflation and toward rising layoffs.

On Friday, the employment situation report for August will deliver key information about the labor market ahead of the next FOMC meeting. A weak report will bolster the case for Fed rate cuts, and could send mortgage rates lower.