Fed’s Waller Calls for July Interest Rate Cut

Federal Reserve Governor Christopher Waller said U.S. policymakers should cut interest rates this month to boost a job market that that looks to be weakening.

“I believe that the Federal Open Market Committee (FOMC) should reduce our policy rate by 25 basis points at our next meeting,” Waller said in a speech hosted by the Money Marketeers of New York University, referring to the central bank’s next meeting, scheduled for July 29-30.

“While the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased,” he said. “With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate.”

Waller said tariffs are “one-off increases” that don’t cause persistent inflation and noted that he expect the economy to remain “soft” the rest of the year. Inflation, meanwhile, “at just slightly above” 2% is near the Fed’s goal, he added. The Fed’s dual mandate involves targeting low and stable inflation at 2% yearly while promoting maximum employment.

His comments come as Fed officials remain divided between those who believe inflation is tame enough to justify cutting the central bank’s influential federal funds rate versus those concerned that tariffs will increase price pressures. Inflation rose in June, up 2.7% year-over-year, according to a report released Tuesday morning by the Bureau of Labor Statistics, well above the central bank’s 2% goal.

“Looking across the soft and hard data, I get a picture of a labor market on the edge,” Waller said.

Citigroup analysts said Waller’s views will likely gain more currency by the end of the year. “For now, he is a dovish outlier wanting to cut rates this month, but we expect his views to become more mainstream in coming months and the Fed to resume rate cuts in September,” the analysts said.