Christopher Waller Steps Into Spotlight as Fed Chair Decision Approaches

Fed governor Christopher Waller has long been viewed as one of the more dovish members of the central bank. (Al Drago/Bloomberg)

Key Points

• Federal Reserve Governor Christopher Waller, a potential Fed chair, emphasized central bank independence and accountability to the public.
• Waller believes monetary policy is above neutral, estimating interest rates are 0.5 to 1 percentage point higher than a neutral level.
• Prediction market Kalshi shows Waller’s chance of becoming Trump’s Fed chair pick rose to 25% from 6% earlier in the week.

Federal Reserve Governor Christopher Waller, a finalist to succeed Jerome Powell as Fed chair, said Wednesday that he would stress the importance of central bank independence in any discussions with President Donald Trump, as markets and policymakers watch closely for signs of who will lead the Federal Reserve next.

Speaking at the Yale CEO Summit in New York, Waller was asked about reports that he was expected to meet with the president later that day. He didn’t confirm or deny that such a meeting was scheduled, but did say he planned to fly back to Washington later Wednesday morning for an afternoon appointment.

Asked whether he would discuss Fed independence with Trump, Waller said “absolutely,” pointing to what he described as a long public record on the issue.

“I spent 20 years of my life working on central bank independence and why it was important,” Waller said, adding that independence must be paired with accountability to the public. He cited regular testimony before Congress, news conferences following policy meetings, and transparency around decision-making as central to that accountability. “There’s no institution in this country that is unaccountable to the electorate. What people often forget is that we want central bank independence to be clear of political interference, but we still have to be accountable to the American public,” he said.

Waller said that the Federal Reserve and White House should be able to work together to coordinate their responses in times of crisis, like they did at the start of the Covid pandemic. “There’s nothing wrong with that,” he said. “It’s not a threat to central bank independence in any way, shape, or form. That is actually needed for the country when those types of events happen,” he said.

Waller was nominated to the Federal Reserve Board by Trump during his first term and has long been viewed as one of the more dovish members of the central bank, particularly as inflation has eased and labor market conditions have softened.

His remarks on Wednesday reinforced that stance. Waller said recent employment data suggest the labor market is weaker than headline numbers indicate, noting that job growth appears close to zero once revisions are taken into account. “That’s not a healthy labor market,” he said, adding that uncertainty around artificial intelligence has led many companies to pause hiring.

Waller said he is less concerned about inflation reaccelerating, arguing that underlying pressures continue to ease and that inflation expectations remain anchored. That assessment, he said, allows policymakers to place greater weight on the employment side of the Fed’s dual mandate.

Tariffs, Waller said, are likely to result in a one-time increase in prices rather than a sustained rise in inflation. He pointed to a lack of wage pressure and said he sees little evidence that higher prices are feeding into larger inflation dynamics, in contrast with the postpandemic inflation surge.

He said monetary policy remains above neutral, estimating that interest rates are still roughly half a percentage point to a full point higher than a level that would neither stimulate nor restrain the economy. That leaves room for further rate cuts, Waller said, though he added that any moves should be gradually made.

Waller also rejected suggestions that recent increases in the Fed’s balance sheet amount to a return to quantitative easing, saying the changes reflect routine reserve management tied to seasonal tax flows and demand for currency, not an effort to stimulate the economy.

In discussing longer-term risks, Waller pointed to the speed at which artificial intelligence is reshaping white-collar work, saying policymakers face the challenge of distinguishing between temporary hiring pauses and more structural shifts that monetary policy alone cannot address.

Prediction market Kalshi on Wednesday showed traders assigning Waller roughly a 25% chance of becoming Trump’s pick for the next Fed chair, up from about 6% earlier in the week, reflecting a shift in market expectations around the succession race.

Trump told The Wall Street Journal last week that he is leaning toward Kevin Hassett, the director of the National Economic Council, or Kevin Warsh, a former Fed governor to succeed Powell. Both enjoy close personal relationships with the president. Waller is now coming in second in prediction markets, behind Hassett but ahead of Warsh.

Write to Nicole Goodkind at nicole.goodkind@barrons.com