Federal Reserve Governor Christopher Waller has declared the central bank should be able to cut rates again as early as July.
In an interview this morning on CNBC, Waller stated that tariffs are not likely to fuel an inflationary spike. He urged the Fed to move slowly in bringing rates down – the last rate cut was enacted in December while Joe Biden was still president. On Wednesday, the Fed opted to hold the federal funds rate at 4.25% to 4.5%, the fourth consecutive time that the central bank maintained the current rate range.
“I think we’re in the position that we could do this and as early as July,” Waller said. “That would be my view, whether the committee would go along with it or not.”
Waller added the Fed could avoid a potential slowdown in the labor market by lowering rates.
“If you’re starting to worry about the downside risk [to the] labor market, move now, don’t wait,” he continued. “Why do we want to wait until we actually see a crash before we start cutting rates? So, I’m all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting, because we don’t want to wait till the job market tanks before we start cutting the policy rate.”
President Trump has repeatedly insulted Fed Chairman Jerome Powell for not cutting rates. Powell’s term expires in May 2026 and Trump has stated he would not renominate him. Both Powell and Waller were appointed to their positions during the first Trump term, and Waller has been mentioned as possible successor to Powell.
Waller must be thoroughly convinced that our economy is already headed south. Rate cuts are used to bolster an economy that is faltering. One good shock like a large spike in price of oil could send this economy south. What’s happening in the middle east could do it.
When rates are kept low in an economy that is doing fine, it creates bubbles. Remember just a few years ago, when rates were VERY low and the common home owner couldn’t outbid the investors to get a house. We were headed towards being a society of renters where only the wealthy could own real estate.
When the wealthy don’t want to put their money into fixed income securities because the interest rates are too low, they can either invest in stock market or real estate.
Lowering Interest rates is a tool to help a struggling economy.