Federal Reserve Governor Christopher Waller stated on Friday (June 20) that tariffs are not expected to significantly stoke inflation, suggesting that the central bank could begin lowering interest rates as early as July. “I think we’re in the position that we could do this as early as July,” Waller told CNBC’s Squawk Box, emphasising a need to act even if the committee ultimately disagrees with his view.
His remarks follow the Federal Open Market Committee’s (FOMC) decision earlier in the week to hold the federal funds rate steady in a range of 4.25-4.5% — the fourth consecutive pause since the December cut.
Waller, appointed by US President Donald Trump, said policymakers should begin easing rates gradually, noting that inflation does not currently pose a major economic threat. “If you’re starting to worry about the downside risk [to the] labour market, move now, don’t wait,” he said. “Why do we want to wait until we actually see a crash before we start cutting rates?”
While futures markets responded positively to Waller’s dovish tone, it’s unclear how much support he’ll find among colleagues. During the recent FOMC meeting, members — including Waller — voted unanimously to hold rates. Projections from the Fed’s dot plot show considerable divergence: Seven of 19 officials expect no cuts this year, two foresee just one, while 10 anticipate two or more.
Trump, meanwhile, has called for a dramatic rate reduction, arguing it should be at least two percentage points lower. On Wednesday (June 19), ahead of the Fed meeting, Trump criticised Fed Chair Jerome Powell for not cutting rates, calling him “stupid.”
Waller, viewed as a potential successor to Powell when his term ends in 2026, said the Fed should move slowly but deliberately. “You’d want to start slow and bring them down… but start the process. That’s the key thing,” he said, arguing that the data no longer justifies delay.
Waller reiterated that any inflationary effects from tariffs are likely to be temporary: “It should be a one-off level effect and not cause persistent inflation,” he noted. “We’ve been on pause for six months… We haven’t seen [a tariff shock]. We follow the data.”
Chair Powell, however, continues to back a cautious approach, citing stable labour conditions and the lack of significant inflation spillover from tariffs. With companies drawing down existing inventory and signs of weakening consumer demand, the Fed remains in wait-and-see mode.
Markets currently see little chance of a cut at the July 29-30 meeting, with the first move now expected in September, according to CME’s FedWatch tool.
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