Federal Reserve Governor Christopher Waller on Friday expressed caution about current economic conditions but still sees the opportunity for interest rate cuts later this year.

Previously an advocate for rate cuts, Waller said in a CNBC interview that recent developments in the labor market as well as the uncertainty of the war with Iran require a more conservative approach.

“It doesn’t mean that I’m going to stay put for the rest of the year,” Waller said on “Squawk Box.” “I just want to wait and see where this goes, and if things go reasonably well and the labor market continues to be weak, I would start advocating again for cutting the policy rate later this year.”

Markets have almost completely doused the chance of rate reductions through the balance of 2026 and well into 2027. That’s a switch from expectations prior to the war, when traders had been looking for two or three cuts this year.

But soaring oil prices and an indeterminate time frame over how long the war will last have changed market expectations and caused a rethinking from Waller and other policymakers. Waller had dissented in January from a Federal Open Market Committee decision not to cut, but went along with the majority earlier this week for another pause.

His earlier dovish position was motivated by a clearly weakening labor market, which produced nearly no net job growth in 2025. However, he noted Friday that the labor force also is not expanding, so “net zero” growth is still leaving the unemployment rate unchanged, even with a 92,000 drop in nonfarm payrolls in February.

“If we get another 90,000 jobs decline in the next jobs report, that’ll be like four negative reports out of five. To me, that’s not zero. So at that point, you need to start thinking about this labor market isn’t good,” Waller said. “I don’t think this war is going to help in any way going forward, but we’ll have to see what happens with inflation.”

Waller is generally sanguine now about inflation, which he sees being boosted by one-off effects from tariffs but otherwise moving structurally towards the Fed’s 2% goal.

“If those tariff effects don’t roll off by the second half of the year, and then inflation starts rising then, then you’re in this tricky business of like, do we worry about inflation? Take a chance on recession or not?,” he said. “So I’m really going to keep an eye on what the future labor markets look like to see whether I want to start advocating for rate cuts in future meetings, but I also want to see what happens with inflation.”

Earlier Friday, Fed Governor Michelle Bowman who, like Waller, was nominated for the job by President Donald Trump, said she believes the Fed can cut three times this year. That would take the benchmark federal funds rate below the neutral level that FOMC officials see as neither supporting nor restricting growth.

Bowman, in a Fox Business interview, took that position even though she said she expects “strong growth” this year “supported by the supply-side policies that this administration is putting into place.”

Bowman is one of just three Fed officials who see aggressive rate cuts this year, according to an update of the Fed’s “dot plot” grid released Wednesday. A total of 19 policymakers participate in the grid.