In a significant departure from the Federal Reserve’s cautious stance, Governor Christopher Waller announced on Friday that a rate cut could be justified as early as July. He downplayed concerns about tariff-fueled inflation and pointed instead to growing risks in the labor market.
Waller argued policymakers should look past short-term price spikes and focus on the underlying trend, which he sees as favorable.
“If you’re starting to worry about the downside risk to the labor market, move now, don’t wait,” Waller said in a CNBC interview. He noted that key indicators are running near the Fed’s long-term targets, creating an opportunity for what he called “‘good news’ rate cuts.” His comments stand in stark contrast to the Fed’s decision just days ago to hold rates steady, a move that drew sharp criticism from President Donald Trump.
While Waller sees a window for action, other indicators and economists suggest a more complex picture. Recent data show initial jobless claims at their highest level since last August, and manufacturing surveys indicate a decline in employment.
Still, many economists remain wary, predicting that the full impact of tariffs will stoke inflation this summer. They believe the Fed will hold off on cuts in the coming months, anticipating further pressure on the economy and the job market, which will set up a clear debate within and around the central bank.
