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Economy February 23, 2026

Fed Governor Says Strong February Jobs Could Lead to March Rate Pause

Waller frames March decision as conditional on February employment report, cites tariffs as primary inflation driver

By Jordan Park
Fed Governor Says Strong February Jobs Could Lead to March Rate Pause

Federal Reserve Governor Christopher Waller said he would consider holding interest rates steady at the Fed's March meeting if February's employment report shows continued strength following an unexpectedly robust January jobs print. Waller emphasized that his March policy decision is contingent on the February payrolls reading and reiterated that he views underlying inflation net of tariff effects as near the Fed's 2% goal, allowing him to concentrate on labor market developments.

Key Points

  • Waller would consider pausing interest-rate changes at the Fed's March meeting if February employment data shows continued strength - impacts monetary policy and bond markets.
  • January payrolls rose by 130,000, described by Waller as "a surprise to the upside," but he said it is unclear whether that gain signals a sustained recovery - relevant to labor markets and consumer-sensitive sectors.
  • Waller attributes much of the current inflationary pressure to import tariffs and believes underlying inflation excluding tariff effects is near the Fed's 2% target - important for inflation-sensitive sectors and interest-rate expectations.

Federal Reserve Governor Christopher Waller indicated he is prepared to keep the policy rate unchanged at the central bank's March meeting should February's employment figures mirror January's unexpectedly strong payroll gain.

In prepared remarks delivered at a National Association for Business Economics conference, Waller noted that January employment rose by 130,000 positions, calling that outcome "a surprise to the upside." He said that if February data shows similar strength, "my view of appropriate monetary policy may tilt toward a pause at our upcoming meeting."

Waller's posture contrasts with his earlier dissent at the Fed's January meeting, when he argued for a quarter-percentage-point rate cut. At that time he cited weak job growth and concerns about rising unemployment as grounds for a more accommodative stance.

Describing his choice for March as "a coin flip," Waller said the decision hinges on the employment report for February, which is scheduled for release on March 6. The Fed's subsequent policy meeting is set for March 17-18.

On inflation, Waller attributed much of the current upward pressure to import duties implemented under the Trump administration. He expects price pressures tied to those tariffs to ebb as companies finish adjusting to the duties. A recent Supreme Court ruling struck down most of the new tariffs, though Waller characterized that development as "unlikely to have a significant impact" on the overall direction of monetary policy.

Waller also said that when excluding tariff-related effects, underlying inflation appears to be close to the Fed's 2% target, which in his view permits a policy focus that is more squarely centered on employment conditions.

He acknowledged the difficulty that policy makers face in interpreting the January payrolls, noting the challenge of determining whether the gain represents a durable recovery in the labor market or will be revised lower if February hiring proves weak. Waller pointed to weak job creation through 2025 even as he observed that economic activity has outperformed expectations.

Looking ahead, he projected first-quarter GDP growth of roughly 2% relative to the fourth quarter of 2025, a pace he said is supported by solid consumer spending and a pickup in industrial activity.

Context and implications

Waller's conditional stance places employment readings at the center of the Fed's near-term deliberations. If February's payrolls confirm continued labor-market strength, the governor signaled a greater likelihood of maintaining current policy rather than moving to loosen monetary settings at the March meeting.

At the same time, his view that tariff effects have driven a meaningful portion of recent inflation and that those effects are moderating informs his willingness to weigh labor-market developments more heavily in the policy calculus.

Risks

  • If February hiring weakens or January's payrolls are revised downward, the case for a March rate pause could weaken, introducing volatility for equities and interest-rate-sensitive assets.
  • Tariff-related price pressures could evolve unpredictably; although a recent court ruling struck down most new tariffs, Waller said that ruling is unlikely to materially change the Fed's policy direction, leaving some uncertainty for inflation forecasts and sectors exposed to import costs.
  • Persistently weak job creation through 2025, despite stronger-than-expected economic activity, creates ambiguity about the labor market's durability and the Fed's ability to prioritize employment without undermining inflation control.

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