Federal Reserve Governor Christopher Waller stated on Friday that he does not foresee tariffs substantially increasing inflation, suggesting that policymakers should consider reducing interest rates as soon as next month.
Speaking in an interview with Finance Newso, Waller indicated that while a cautious approach is advisable, the central bank should begin to ease its stance, given that inflation does not currently pose a significant economic threat, a trend he expects will persist.
“I think we’re in a position that we could start doing this as early as July,” Waller remarked in a “Squawk Box” segment with Finance Newso’s Steve Liesman. “That would be my perspective, regardless of whether the committee agrees.”
This announcement follows the Federal Open Market Committee’s decision earlier this week to maintain its key interest rate steady, marking the fourth consecutive month without change, following the previous cut in December.
Waller was appointed to the Fed by President Donald Trump during his first term, a move that has led Trump to frequently urge the central bank to lower rates in order to alleviate borrowing costs associated with the national debt of approximately $36 trillion.
In his comments, Waller expressed concern over potential risks to the labor market, advocating for a proactive approach to policy adjustments. “If you’re becoming concerned about downside risks to the job market, take action now—don’t wait,” he stated. “Why should we wait until we see a downturn before we start cutting rates? I support the idea of considering a policy rate reduction at the next meeting, as we want to act before the job market suffers.”
The stock market saw a positive response following Waller’s statements.
It remains uncertain whether Waller will garner much backing for his proposals. The FOMC, which includes Waller, unanimously voted to keep rates unchanged at this week’s meeting, maintaining the target range for the federal funds rate at 4.25%-4.5%.
According to the “dot plot” reflecting the expectations of individual FOMC members for interest rates this year, seven of the 19 participants anticipate rates will remain steady, two expect only one cut, while ten see the possibility of two to three reductions. This variability indicates a general hesitance among policymakers regarding the direction of rates, although the median forecast suggests two cuts may occur.
Trump has called for significant adjustments, asserting that the benchmark rate should be at least two percentage points lower, even suggesting it should fall by 2.5 percentage points below the current level of 4.33%. In comments made prior to the Fed meeting, Trump criticized Fed Chair Jerome Powell as “stupid” for not advocating for a reduction.
Waller, however, emphasized the importance of a gradual approach. “It’s wise to initiate any cuts slowly to avoid unexpected surprises,” he explained. “We’ve maintained a pause for six months to assess the situation, and thus far, the data appears positive. I don’t believe we should delay much longer; even if tariffs are introduced later, their effects are likely to be temporary rather than leading to persistent inflation.”
Other officials remain hesitant about cutting rates, opting to wait and analyze the long-term effects of Trump’s tariffs on inflation, employment, and general economic growth.
At a news conference following the recent meeting, Powell reiterated his belief that the Fed can afford to take a wait-and-see approach as the labor market continues to remain strong. Recent inflation data has shown little effect thus far, as businesses deplete inventories accumulated prior to the tariff announcements amid signs of slowing consumer demand, which is affecting pricing power.
Current futures market forecasts indicate that there is virtually no likelihood of a rate cut at the upcoming meeting scheduled for July 29-30, with the next anticipated adjustment likely occurring in September, according to the CME Group’s FedWatch tool.
