Fed's Waller: I've been clear I think we should cut at the next meeting

Good morning. I would like to thank the Peterson Institute for International Economics for the kind invitation to speak with you today. I am especially looking forward to an engaging discussion with Esther George. I have long admired her exemplary service to the nation as president and CEO of the Federal Reserve Bank of Kansas City. She set a high bar for every Fed official. Before taking Esther’s questions, I would like to begin by offering a few observations about economic conditions and monetary policy. These are my personal views and not necessarily those of other FOMC participants. Economic Outlook and Balance of Risks The pace of economic activity picked up in the second quarter, propelled by higher consumer spending and solid growth in business fixed investment. Real GDP grew at an annual rate of 1.4% in the first half of 2025, which is somewhat below estimates of long-run potential.1 I expect output growth at a similar rate in the second half of 2025, before it returns to potential in 2026 or sooner. The policy uncertainty that has held back business and household spending continues to lift, and I expect some stimulus to growth from fiscal policy. Financial condition Fed’s Musalem: Expects Inflation To Ebb Back To 2% By Second Half Of 2026 - Tariffs Will Work Through Economy Over Two To Three Quarters - Expects Tariff Inflation Impact To Fade Eventually - Expects Job Market Cooling With Downside Risks To Labor Sector Fed’s Musalem: US Central Bank's Current Restrictive Monetary Policy In Right Place Given Data - Fed Needs To Balance Inflation, Job Goals Going Forward - There’s A Risk Tariffs Could Cause Persistent Inflation Rise Fed’s Musalem: Sees Job Market Holding Near Full Employment - Sees Modest GDP Growth This Year Before Returning To Trend In 2026 - Uncertainty Lifting For Economy, Fiscal Policy May Add Stimulus - Job Market Break-Even Level Between 30,000 And 80,000 Jobs Per Month