Fed’s Waller: January jobs data an upside surprise, if it continues a policy pause may be appropriate

WASHINGTON, Feb 23 (Reuters) – Federal Reserve Governor Christopher Waller said he was open to leaving interest rates on hold at the Fed’s March meeting if upcoming February jobs data indicates the U.S. labor market had “pivoted to a more solid footing” after a weak 2025.

Unexpectedly strong January job growth of 130,000 positions was “a surprise to the upside,” and if that continues in February “my view of appropriate monetary policy may tilt toward a pause at our upcoming meeting,” Waller said in remarks prepared for delivery at a National Association for Business Economics conference.

Waller dissented against the decision at the Fed’s January meeting to keep rates on hold, saying he felt it would be appropriate to cut the policy rate another quarter percentage point given weak job growth and what he saw as risks unemployment could rise.

At the time he was still under consideration as a possible Fed chair by President Donald Trump, who has called on the central bank to make sharp rate cuts. Trump has since nominated Kevin Warsh to take over when Fed chair Jerome Powell’s term ends in May.

Waller said he regarded inflation now as largely pushed higher by the Trump administration’s import taxes, and likely to fade as firms finished adjusting to the levies.

A Friday Supreme Court ruling that tossed out most of the new duties has left the situation again in flux, but Waller said it was “unlikely to have a significant impact” on the path of monetary policy.

At this point he said he viewed inflation, once stripped of the lingering impact of tariffs, as likely close to 2%, leaving him to focus on the state of the job market.

The challenge, he said, is to determine whether the jump in January jobs showed the market had “turned a corner” — a possibility, he said, given ongoing economic growth — or whether that will be revised lower and the weak hiring return in February.

February jobs data will be released on March 6, ahead of the Fed’s March 17-18 meeting.

The January jobs report “was clearly a surprise to the upside and suggests that the labor market may be turning a corner,” Waller said. “But if the good labor market news of January is revised away or evaporates in February, it would support my position at the FOMC’s last meeting, that a 25-basis-point reduction in the policy rate was appropriate.”

(Reporting by Howard Schneider; Editing by Chizu Nomiyama )