Federal Reserve Governor Christopher Waller just made the case for cutting interest rates at the Federal Open Market Committee's July meeting.
What Happened: On Thursday, speaking at the Money Marketeers of New York University, Waller said, “I believe that the Federal Open Market Committee (FOMC) should reduce our policy rate by 25 basis points at our next meeting.”
Waller pointed to a string of recent economic data to make his case. “Real gross domestic product (GDP) growth was likely around 1 percent in the first half of this year and is expected to remain soft for the rest of 2025,” he said.
He also believes consumer spending “is expected to continue to grow at a similar pace, tempered by the expected slowing in growth of real disposable income,” while framing labor market trends as a particular concern, since “Private payroll employment grew just 74,000, a much smaller gain than in the previous two months,” he said.
He says job growth is “much closer to zero,” describing private-sector payrolls as “near stall speed and flashing red,” highlighting the need for the Fed’s intervention.
On inflation, Waller believes the recent increases tied to import tariffs should not influence the central bank’s policy. He says, “Tariffs have boosted, and will continue to boost, inflation a bit above the FOMC’s 2 percent objective this year, but policy should look through tariff effects and focus on underlying inflation.”
Summing up his stance, Waller said, “The evidence of a slowing economy, and all the factors I have cited weighing on economic activity, mean that the risks to the FOMC’s employment mandate are greater, and sufficient to warrant an adjustment in the stance of monetary policy.”
Why It Matters: Consumer spending, however, continues to remain strong, with U.S. retail sales jumping 0.6% in June, ending a two-month losing streak, in the face of tariffs, trade tensions and geopolitical uncertainties.
This weakens the case for a rate cut, amid growing pressure on Fed Chair Jerome Powell by President Donald Trump in this regard.
Powell has repeatedly said that it was Trump’s tariffs that deterred the Fed from easing its monetary policies. “In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” he says.
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