NEW YORK (Reuters) -Federal Reserve Governor Christopher Waller said on Thursday he favors another interest rate cut at the U.S. central bank's policy meeting later this month because of worrisome labor market developments, while a colleague again made the case for an even more aggressive path of cuts. 

"Based on all of the data we have on the labor market, I believe that the (Fed's policy committee) should reduce the policy rate another 25 basis points" at the end of October, Waller said in a speech given to a Council on Foreign Relations gathering in New York.

What comes after that meeting, Waller said, depends on future data. He said as he weighs whether more rate cuts are needed, "I will be looking for how the solid GDP data reconcile with the softening labor market." Waller reiterated his view that trade tariffs are having a modest impact on inflation and that price pressures remain on track to hit the Fed's 2% target. That outlook allows the central bank to focus policy deliberations on the job market, where there have been "some clear warning signs." 

"The broad message of all the labor market data is one of weakening in demand, relative to supply, even with substantially lower net immigration and a decline in labor force participation this year," Waller said. He added as the Fed navigates this month's meeting without major data due to the U.S. government shutdown, private data are sending mixed signals about the state of hiring. 

Waller explained that any signs of a pick-up in the job market amid strong growth could slow the need for rate cuts. But if hiring sputters and inflation remains in check, "I believe the FOMC (Federal Open Market Committee) should proceed to reduce the policy rate toward a neutral level, which I judge is about 100 to 125 basis points lower than it is today," implying a policy rate in the 2.75%-3.00% range.

Meawwhile, speaking in Washington, the Fed's newest governor, Stephen Miran, who is unusually on leave from the Trump White House while working at the central bank, again made his case for a more aggressive rate cut path than the one favored by his colleagues for 2025. He continued to argue that broader policy changes, including immigration shifts which he believes will lower inflation, give the central bank ample space to lower short-term borrowing costs, while adding renewed trade tension between the U.S. and China also call for action. 

"I had been thinking the U.S. economy is in a pretty good place; I still think it's in a pretty decent place, however there's new risks that didn't exist a week ago. One substantial risk is that in my opinion, monetary policy is too tight, it's too restrictive," Miran said. "The longer it stays that restrictive, the greater the downside risk, both from the policy itself and also the greater brittleness and susceptibility to the types of shocks like we just have potentially reintroduced in the last week." 

He added fresh tensions with China "is a change to the balance of risks that didn't exist a week ago." 

The official also shrugged off concerns that making credit cheaper may create financial market imbalances, saying the market force he thinks matters most, housing, remains very tight. 

US CENTRAL BANK EXPECTED TO CUT RATES THIS MONTH

Fed policymakers will meet on October 28-29 amid a dearth of data due to the government shutdown. After the central bank lowered its policy rate by a quarter of a percentage point to the 4.00%-4.25% range last month, officials are broadly expected to deliver the same-sized rate cut this month. Forecasts released by the Fed last month indicate that between now and the end of the year, officials see the federal funds rate falling to between 3.5% and 3.75%, before ebbing to 3.25% to 3.5% next year.  

The rate cuts are aimed at steadying a tottering job market at a time when inflationary pressures are above the Fed's 2% target and will likely accelerate for a time as President Donald Trump's massive and ever-shifting trade tariffs work their way through the economy.

Given Waller's dovishness and concern about not letting the job market lose too much ground, some noted the central banker's flagging of conditions that would make him reluctant to cut rates as notable.

Waller's remarks "mark a notable shift away from the unambiguously dovish approach he has taken in recent months, with Waller focused on the tension between stronger growth and weaker labor data," analysts at Evercore ISI said. "He warned that while October is a go, a December cut is not guaranteed if firmer growth leads to firmer labor data." 

The Fed officials spoke on a day when a factory sector report from the Philadelphia Fed pointed to mixed conditions in October. Separately, a survey of business leaders from the New York Fed found that in October service activity "declined substantially," noting "firms generally do not expect conditions to improve in the months ahead." 

In comments on Tuesday, Fed Chair Jerome Powell suggested an October rate cut remains possible. "Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago," adding that "rising downside risks to employment have shifted our assessment of the balance of risks," he said. 

Waller, who is in the running to succeed Powell when his term as Fed chief ends next May, has been among the first wave of officials supporting rate cuts, driven by a worry that the job market is running out of gas and tariffs will cause a one-time shift in price levels that the Fed can look through.

Some Fed officials have been less sanguine about the inflation outlook and more reluctant to cut rates, while others concur that tariffs will present a transient risk to price pressures. Officials at the Fed's September meeting penciled in around half of a percentage point worth of rate cuts for the remainder of this year.