Fed’s Waller says the FOMC should cut interest rates by 25bp at the July meeting

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Federal Reserve Governor Christopher Waller speech.

Waller signalled support for a 25bp rate cut at the upcoming July meeting, citing increased downside risks to the economy and growing signs of labour market weakness. He warned against waiting for a sharper deterioration in employment before acting, arguing that delaying could require more aggressive policy moves later.

Waller downplayed the inflationary impact of tariffs as likely transitory, noting that core inflation remains close to target absent trade-related pressures. He sees limited upside risks to inflation, with private sector hiring “near stall speed” and GDP growth hovering around 1%.

A July cut, he said, could give the Fed room to pause over the next few meetings, aligning policy more closely with a neutral setting as the economy slows.

Full text is here:

Headlines via Reuters:

  • The Fed should cut interest rates 25 basis points at July meeting

  • Rising risks to economy favour easing policy rate

  • If underlying inflation remains in check and growth tepid, more cuts needed

  • The Fed should not wait until labour market hits trouble before cutting rates

  • Delaying cuts runs risk of need for more aggressive action later

  • Evidence mounting that labour market is growing weaker

  • Tariffs likely to have one-time impact the Fed can look through

  • July rate cut could give the Fed space to hold rates for a few meetings

  • Absent tariff impact, inflation is close to the Fed’s 2% target

  • Tariffs will boost inflation in the near term

  • Risks include an economic slowdown with GDP around 1%

  • Economy calls for monetary policy closer to neutral setting

  • Expects tariff impact to fade next year

  • Data suggests job market ‘on the edge’

  • Upside risks to inflation are limited

  • Sustained 10% tariff likely to increase inflation 0.75%–1% this year

  • Private sector hiring ‘near stall speed’

At present, from what we know, both Waller and Bowman are in favour of a 25bp rate cut at the July 29-30 Federal Open Market Committee (FOMC) meeting. There are 12 voters on the FOMC, so the numbers are not there yet for a rate cut.

Fed Governor Christopher Waller

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