Federal Reserve Gov. Christopher Waller said Friday that policymakers should consider lowering interest rates as early as next month, as they don’t think tariffs will significantly raise inflation.
In an interview with CNBC, the central banker said he and his colleagues should move slowly, but they start to feel at ease as inflation becomes a longer and greater economic threat.
“I think we’re in a position to do this,” Waller said in an interview with CNBC’s Steve Reesman on Scokebox. “It’s my opinion whether the committee will follow that.”
Comments come two days after the Federal Open Market Committee voted to stabilize key interest rates.
President Donald Trump, who appointed Waller as governor while in office, has denounced the Fed for lowering interest rates to reduce borrowing costs on $36 trillion in government bonds.
In his remarks, Waller said he believes the Fed should cut to avoid a potential slowdown in the labor market.
“If you’re now starting to worry about the movement of the negative side of risk labor market, don’t wait,” he said. “Why wait until you actually see a crash before you cut your rate? So I say you should start thinking about reducing your policy rate at the next meeting, because you don’t wait until the job market tank before you cut your policy rate.”
It is unclear whether Waller can reverse much of the support for his position.
The FOMC, including Waller, voted unanimously at this week’s meeting, locking the benchmark federal fund rate into a target range of 4.25%-4.5%.
According to a “dot plot” of individual officials’ expectations for interest rates this year, if participants in the seven conference said they saw a steady this year, the two saw only one cut, while the remaining 10 people expect two or three cuts. The diversification reflected a sense of uncertainty about policymakers about where interest rates should go.
Trump is seeking dramatic moves, saying he believes the benchmark rate should be at least 2 percentage points lower, suggesting it is 2.5 points below the current level of 4.33%.
But Waller said he believes the committee should move slowly.
“You’re going to want to start slowly and beat it to make sure there’s no big surprise. But start the process, and that’s what’s important,” he said. “We’ve been pausing for six months to wait and see, and so far the data hasn’t been a problem… Even if the tariffs come later, I don’t think we need to wait any longer, even if the effects are still the same.
Other officials are reluctant to cut, mainly as they wait for what long-term impact Trump’s tariffs will have on inflation as well as on labor markets and broader economic growth.
Chairman Jerome Powell reiterated at his post-meeting press conference on Wednesday that he believes the Fed can remain in standby mode as the labor market continues to hold. Recent inflation data shows little pass-through as long as companies burn stocks accumulated in preparation for their tariff announcements. And amid concerns that consumer demand is reducing its pricing power.
Futures market pricing shows that there is little chance of fee reductions at the July 29th-30 meeting, with the next move expected to take place in September.
