Can This Man Save The Federal Reserve?

If there were a central banker built to get along with President Donald Trump, it would be Christopher Waller.

For one, the plain-spoken economist has helped chart a path to lower interest rates. Appointed to the Federal Reserve by Trump in his first term, Waller interviewed with the president for the institution’s top job last month.

He projects MAGA-friendly energy, not just in his ideas but as a devoted weightlifter who can deadlift 360 pounds. Waller once prominently invoked mixed martial arts fighting in describing monetary policy. Fighting inflation, he said, made him feel like “an MMA fighter who keeps getting inflation in a choke hold, waiting for it to tap out, yet it keeps slipping out of my grasp at the last minute.”

“But let me assure you that submission is inevitable — inflation isn’t getting out of the octagon,” he added, a reference to the competition venues where Ultimate Fighting Championship events are held. (Trump loves UFC fights so much that he plans to hold one at the White House this year.)

Waller is seen as a long shot for Fed chair, given his lack of an extensive relationship with the president. But nothing seems assured yet: Trump on Friday signaled he might not wind up choosing Kevin Hassett, the White House economist previously regarded as the frontrunner.

Even more to the point: The Trump administration’s legal blitz against the Fed is likely to make Waller one of the most important forces within the bank no matter who the next Fed chief is. With the Justice Department investigating outgoing Fed Chair Jerome Powell — and Powell fighting back aggressively, and so far successfully — the future of the institution depends more than ever on its leaders’ ability to navigate this political moment.

And that’s where Waller comes in. Let me explain.

Trump’s Justice Department served the Fed with subpoenas last week as part of a criminal investigation into Powell’s statements to Congress, a move that the central bank chief has framed as a threat to pressure him to slash interest rates.

Pile on Trump’s explicit demands for loyalty from his choice for the Fed’s top job, and let’s just say whoever he picks will face skepticism from within the central bank and in financial markets about the degree to which they will defer to the president.

If Trump opts for an obvious yes-man in the job, good luck to that person when they try to marshal support for a policy agenda from a group of colleagues who care deeply about the Fed’s independence.

That dynamic could lead to a larger role for Waller, a gregarious Midwesterner who both shares many of Trump’s policy preferences and also cares ferociously about maintaining the bank’s credibility as an institution.

Waller’s views are influential within the Fed already: He has repeatedly been ahead of the curve in predicting how economic conditions would unfold. Most notably, he predicted in 2022 that the Fed could bring down inflation without a troubling rise in unemployment — an episode that gained him particular cred in the economics world because he went up against former Treasury Secretary Larry Summers and won.

Waller also, as he put it to CNBC recently, has a “long paper trail” of research about the benefits of having a politically insulated Fed.

In other words, he isn’t seen as a willing puppet.

So while he doesn’t have any formal leadership title at the central bank, nor the kind of loyalty from fellow officials that Powell has built up at the Fed over many years, he’s positioned to credibly make the case with his colleagues for lower rates that Trump’s new chair could have a harder time making.

And despite some speculation that he might leave if he’s not chosen as chair, a source close to Waller tells me he’s not going anywhere anytime soon.

“He’s one of X number of people on the [rate-setting committee], but given his background, given his creds, given his performance, given his ability to persuade, I think he might be able to carry more than his weight,” said David Andolfatto, who chairs the economics department at the University of Miami and worked alongside Waller at the St. Louis Fed for more than a decade.

(When pressed, Andolfatto said the pun related to Waller’s weightlifting was not intended.)

In a way, Waller is a perfect encapsulation of the tradeoffs that Trump will face within the central bank. In his advocacy for lower rates, he could be one of the new Fed chair’s strongest allies, at least for the time being. But he also has his own views about the structure and operations of the Fed that might lead him to resist any effort to take a hatchet to institutional norms.

Waller has already indicated — gently — that his views on Fed independence diverge from Trump’s.

The president argues that he should have a “say” in interest rates. In response, Waller pointed to regular breakfasts between the Treasury secretary and Fed chair as the proper channel for dialogue between the administration and the central bank.

“That’s a normal chain of communication where information can be passed from the White House to the chair about what the administration’s needs are,” he said at a CEO summit at Yale.

Any further attempts by the president to attack the Fed risk alienating officials like Waller who otherwise might get Trump closer to the policy he wants, even if they don’t see the world in exactly the same way Trump does.

Case in point: Last July, Waller dissented alongside fellow board member Michelle Bowman from the Fed’s decision to hold rates steady, in part saying that Trump’s sweeping tariffs weren’t likely to cause a problematic bout of inflation — an argument the administration had also been making.

But he cited deterioration in the labor market as a reason for urgency in lowering rates — a meaningful departure from Trump’s message crowing about the health of the economy. By the central bank’s next policy meeting in September, Waller’s fellow officials reached a similar conclusion and began a series of rate cuts.

Episodes like this are one reason why Waller’s speeches are already tracked closely by Wall Street. He’s the only Ph.D. economist on the Fed’s seven-member board with a heavy research background in monetary policy and often tends to be more forward-looking in his analysis. When a group of business executives were given a live poll at the Yale event about who they wanted for Fed chair, 81 percent chose Waller.

“The Fed job is primarily a job of economic forecasting,” said Neil Dutta, head of U.S. economic research at Renaissance Macro Research. “And Waller’s really good at that, full stop.”

If his dark horse candidacy does actually lead to a nomination, Waller would be a well-known quantity to both Wall Street and people at the central bank, where he runs the internal committee at the Fed that oversees the its 12 regional branches, whose leaders also have a say in interest rates.

In that role, he’s spent a lot of time pushing for those regional Fed banks to have much more uniform policy and governance, though each of them are technically separate financial institutions.

It’s a window into what his approach to the central bank could be, where his style is direct. Andolfatto recalled when Waller overhauled and consolidated the research division at the St. Louis Fed, which he took over in 2009.

“One of the senior people wanted to fight it,” he said. “He got fired. That’s the type of firm, decisive action that that man is willing to take.”

Another Trump-friendly quality, perhaps.

Ironically, one thing Trump might not like about Waller is his consistency on interest rates: He voted, weeks out from the 2024 election, for a jumbo rate cut in response to an apparently weakening job market. Trump complained at the time that the Fed's move would help Democrats.

Of course, the central bank went on to cut even more after Trump won, with Waller’s regular support. But it’s unclear whether that episode might be disqualifying for his bid for the chairmanship.

Trump doesn’t seem to hold it against him, at least not yet. When asked about Waller after their December meeting, he said: “He’s fantastic.”