Fed May Cut Rates by July, Waller Says
U.S. Federal Reserve Governor Christopher Waller argued Tuesday that the central bank should consider cutting interest rates as early as July, ahead of any potential “tank[ing]” of the labor market, according to a CNBC appearance.
Key Points
- The Fed maintained its benchmark rate unchanged for a fourth consecutive meeting this month.
- Fed Chair Jerome Powell acknowledged elevated economic uncertainty stemming from President Trump’s trade policies and Middle East tensions but noted the situation has “diminished.”
- Waller stated the Fed could initiate rate cuts by July, warning against waiting until the labor market deteriorates.
The comments come despite recent inflation data showing rates cooler than previously anticipated.
Fed Projections Remain Split
Economic projections released Wednesday indicated a median forecast for two interest rate cuts this year. However, a growing number of Fed governors expect no cuts amid concerns about higher-than-anticipated inflation.
The probability of a July rate cut, according to CME FedWatch data, has decreased slightly from 28% a month ago to 14%, though sentiment among Fed policymakers remains cautiously optimistic about easing.
Waller’s Caution
“I think we’re in the position that we could do this as early as July,” Waller said on CNBC’s “Squawk Box,” adding, “Whether the committee would go along with it or not is another question.”
The Fed Governor emphasized the need to act before the labor market weakens further, stating, “We don’t want to wait until the job market tanks.”
Market Response
Bitcoin traded flat at around $104,300 as of Friday, maintaining its value despite geopolitical tensions between Israel and Iran. Other cryptocurrencies showed minimal movement.
Economist Analysis
Fed easing could provide a boost to risk assets like Bitcoin, as seen last year after the central bank’s full percentage point reduction. However, the current uncertainty, compounded by President Trump’s criticism of the Fed (“stupid”), creates a complex policy environment.
“The Fed is caught in a holding pattern due to tariff uncertainty…,” noted Grayscale’s Head of Research Zach Pandl.
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