Federal Reserve Gov. Christopher Waller on Thursday called for the central bank to cut interest rates in July.
Waller said that “the risks to the economy are weighted toward cutting [rates] sooner rather than later.” The Fed governor made the comments at an event hosted by Money Marketeers of New York University.
“First, tariffs are one-off increases in the price level and do not cause inflation beyond a temporary surge,” Waller said during the speech. “Standard central banking practice is to ‘look through’ such price-level effects as long as inflation expectations are anchored, which they are.”
“Second, a host of data argues that monetary policy should be close to neutral, not restrictive,” Waller added. “Real gross domestic product (GDP) growth was likely around 1% in the first half of this year and is expected to remain soft for the rest of 2025, much lower than the median of FOMC participants’ estimates of longer-run GDP growth.”
He also pointed out that the national unemployment rate is 4.1% which he said was “near the Committee’s longer-run estimate.”
“Headline inflation is close to our target at just slightly above 2% if we put aside tariff effects that I believe will be temporary,” Waller continued. “Taken together, the data imply the policy rate should be around neutral.” (RELATED: Steve Moore Explains How Trump’s Policies Have Changed Inflation And Americans’ Wages)
WASHINGTON, DC – JUNE 25: Federal Reserve Chairman Jerome Powell testifies before the Senate Committee on Banking, Housing, and Urban Affairs during a hearing to “examine the Semiannual Monetary Policy Report to the Congress” on Capitol Hill on June 25, 2025 in Washington, DC. (Photo by Kent Nishimura/Getty Images)
Waller, who is notably seen as a potential candidate to replace Powell as Fed chairman, added that with inflation being “near target,” the central bank “should not wait until the labor market deteriorates” before cutting rates.
“My final reason to favor a cut now is that while the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased,” Waller said. “We should not wait until the labor market deteriorates before we cut the policy rate.”
The Fed has been facing mounting pressure from President Donald Trump to lower its target range this year. Additionally, Federal Housing Finance Agency (FHFA) Director William Pulte urged Fed Chair Jerome Powell to slash interest rates in May.
On Wednesday, Trump called Powell “a knucklehead” because the Fed had not slashed interest rates, but the president said it was “highly unlikely” that he would fire him.
“As I hope will be evident by now, the evidence of a slowing economy, and all the factors I have cited weighing on economic activity, mean that the risks to the FOMC’s employment mandate are greater, and sufficient to warrant an adjustment in the stance of monetary policy,” Waller stated.
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