Fed's Waller Backs Rate Cut In December Amid Weakening Labor Market: 'Not Worried About Inflation Accelerating' - SPDR S&P 500 (ARCA:SPY)

Core Viewpoint - Federal Reserve Governor Christopher Waller advocates for continued rate cuts, emphasizing the need to address risks from a weakening labor market, with a proposed cut at the next meeting in December [1][7]. Labor Market Analysis - Waller identifies the "weak labor market" as a primary concern, prioritizing it over inflation worries, stating he is not significantly concerned about inflation accelerating [2][5]. - He describes the labor market as "still weak and near stall speed," attributing the slowdown to falling demand rather than supply issues, supported by private-sector data [4][5]. Economic Data and Insights - Despite a government shutdown delaying key economic reports, Waller asserts that there is sufficient private and public data to inform economic conditions, indicating that policymakers are not "flying blind" [3]. - He highlights strains on U.S. consumers, particularly middle- and lower-income groups facing challenges like low housing affordability and high auto purchasing costs [6]. Rate Cut Justification - Waller concludes that a 25-basis-point cut in December is essential for "risk management," aiming to provide insurance against further deterioration in the labor market and to move policy towards a neutral stance [7]. Market Reactions - The CME Group's FedWatch tool indicates a 46.6% probability of a rate cut during the December meeting, reflecting market sentiment [8]. - Following Waller's remarks, major ETFs tracking the S&P 500 and Nasdaq 100 experienced declines, with SPY down 0.93% and QQQ down 0.85% [8].