Fed Governor Waller's prediction of faster inflation softening has put him in the half-point-cut camp.

• At the Fed's meeting this week, Christopher Waller, a Governor, stated that he supported a 50 basis point rate reduction because inflation is easing at a faster pace than he had anticipated.
• Waller stated that various outcomes may occur based on future economic data and how it unfolds.

Christopher Waller, a Federal Reserve Governor, stated on Friday that he backed a 0.5 percentage point rate reduction at the upcoming meeting because inflation is declining at a faster pace than he had anticipated.

According to Waller, recent data indicates that core inflation, which excludes food and energy, is below the Fed's preferred measure of 1.8% over the past four months. The Fed aims for an annual inflation rate of 2%.

During an interview with CNBC's Steve Liesman, Waller stated that inflation is softening much faster than he anticipated, which made him say, "Wow, look, I think 50 basis points is the right thing to do," putting him over the edge.

The consumer and producer price indexes both increased by 0.2% in the month, while the 12-month CPI rate stood at 2.5%.

Recent data has shown a stronger trend lower, giving the Fed space to ease more as it shifts its focus to supporting the softening labor market, according to Waller.

Before the Fed meeting, markets were anticipating a 0.01% cut.

He stated that the committee is signaling that we have room to move.

The Fed's decision to reduce its key borrowing rate by 50 basis points to a range of 4.75%-5% signaled the possibility of another half-point cut this year and a full percentage point reduction in 2025.

Economic data will determine the outcome of various scenarios, as indicated by Waller.

"I supported significant rate increases when inflation exceeded expectations, but now I would take a more cautious approach to maintain our 2% inflation target. If the data shows a continued decline in inflation, I would be more open to aggressive rate cuts to bring inflation closer to our target."

The Commerce Department will release the August report on the personal consumption expenditures price index next week, which the Fed will examine to assess inflation. Chair Jerome Powell stated on Wednesday that the Fed's economists anticipate the measure to indicate an annual inflation rate of 2.2%. In contrast, it was 3.3% a year ago.