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Washington
CNN
—
A top official at the Federal Reserve on Thursday reiterated his call for an interest rate cut later this month, despite data showing ongoing resilience in the US economy and other central bankers pushing to keep rates steady.
Fed Governor Christopher Waller, at a New York event, said the US central bank should lower borrowing costs at its July 29-30 policy meeting to preserve the labor market’s strength.
“With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate,” he said. “I believe it makes sense to cut the (Fed’s) policy rate by 25 basis points two weeks from now.” (Twenty-five basis points equals one quarter of an interest rate point.)
Waller, appointed to the Fed by President Donald Trump in 2021, is considered a contender to succeed Fed Chair Jerome Powell, whom Trump has excoriated for keeping rates steady and has vowed to replace next year — if not before. Treasury Secretary Scott Bessent told Bloomberg on Tuesday that a “formal process” has begun to identify Trump’s pick for Fed chair, and the president has said he will “very soon” announce his nominee.
Waller’s stance is in contrast with most of the other central bankers who’ve said the Fed can afford to be patient for a bit longer to see how much Trump’s tariffs push up prices. And for now, the odds of a July rate cut remain very low, according to the futures market.
For example, Fed Governor Adriana Kugler said Thursday at an event in Washington that the central bank should stand pat “for some time” because inflation has started to pick up on Trump’s tariffs and “given the stability in the employment side of our mandate.”
In June, employers added 147,000 jobs and the unemployment rate edged lower to 4.1% from 4.2%, both beating economists’ expectations.
But Waller sees “a picture of a labor market on the edge” and that the Fed “should look through tariff effects and focus on underlying inflation, which seems to be close to the (Fed’s) 2% goal.”
“We don’t have to cut and then just go on a tear for meeting after meeting,” he said. “The whole idea for me is get started, get ahead of things before it starts. If you wait until the labor market deteriorates, you’re too late.”
Waller has previously called for a rate cut, but since then, the job market and retail sales have shown unexpected signs of strength, and inflation has rebounded somewhat — all signals that would typically give the Fed pause about cutting rates. However, Waller isn’t the only Fed official who has called for a July rate cut.
Last month, Fed Vice Chair for Supervision Michelle Bowman said the Fed could begin cutting rates as soon as July, though she hasn’t reiterated that position since the latest government data showed Americans are still spending and businesses are still hiring.
The latest economic data doesn’t show that the Fed needs to step in with a rate cut to stimulate the economy, according to most Fed officials and economists. And the broad expectation that Trump’s tariffs will push up prices to some extent has contributed to the Fed’s wait-and-see posture.
That strategy hasn’t sat well with Trump, who has continued to blast the central bank for not lowering rates at all this year. He and his top advisers have also seized on the Fed’s $2.5 billion renovation as a possible legal avenue to oust Powell.
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