by Maria Eloisa Capurro
Federal Reserve Governor Christopher Waller said policymakers should cut interest rates this month to support a labor market that is showing signs of weakness.
“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 Thursday in the text of a speech prepared for an event hosted by the Money Marketeers in New York. “I believe it makes sense to cut the FOMC’s policy rate by 25 basis points two weeks from now.”
Fed officials will gather July 29-30 in Washington.
Waller’s remarks set him apart from most of his fellow policymakers, who have characterized the employment landscape as still solid.
“Looking across the soft and hard data, I get a picture of a labor market on the edge,” he said.
A monthly employment for June, published on July 3, showed a sharp slowdown in private-sector job growth and a deceleration in wage growth, even as the unemployment rate ticked lower. The task of analyzing the labor market has been complicated in recent months by Trump’s rapid crackdown on immigration, which has coincided with an outsize decline in the foreign-born labor force.
Waller is one of two Fed officials, alongside Vice Chair for Supervision Michelle Bowman, who had already signaled their openness to cutting rates as early as this month.
He had previously differentiated himself from other officials by saying he believed the impact of tariffs on inflation would be temporary, and he repeated that view Thursday.
“Policy should look through tariff effects and focus on underlying inflation, which seems to be close to the FOMC’s 2% goal,” he said, referring to the Fed’s rate-setting panel, the Federal Open Market Committee.
Underlying inflation in the US rose by less than expected in June for a fifth straight month, though the latest data also showed an aggressive set of tariffs announced by President Donald Trump in April were beginning to lift prices for some goods.
Waller said inflation expectations remain anchored and wage growth isn’t accelerating, easing concerns of a persistent inflation effect.
He said the risk of a weaker jobs market is “greater and sufficient” to cut interest rates.
“The economy is still growing, but its momentum has slowed significantly, and the risks to the FOMC’s employment mandate have increased,” he added.
He said he expects the economy to “remain soft” for the rest of 2025 after growing at about a 1% pace in the first half of the year.
Several other policymakers, including Governor Adriana Kugler and New York Fed President John Williams, have expressed more concern about the potential impact of tariffs on inflation and have said they’d prefer to wait longer before lowering rates.
Investors expect the central bank to hold interest rates steady when they gather later this month, and see slightly better than even odds of a rate cut in September, according to futures contracts.
In a question-and-answer session after his speech, Waller said the timing of additional rate cuts — beyond the one he is pushing for — would depend on incoming economic data.
“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. It’s over.”
Waller has been among the names touted to succeed Jerome Powell at the head of the central bank when his term as chair expires in May. Trump, who will nominate Powell’s successor, has been demanding lower rates from the Fed.
He said he hadn’t spoken with administration officials about the job.
Waller also fielded a question about the renovation of the central bank’s headquarters. Republicans have seized on cost overruns on the project to attack Powell.
“There’s a lot of attention on it,” Waller said. “Any construction project I’ve ever heard, this is a common — I mean, I’m not defending it — but this is not an uncommon thing. And we had inflation much higher than anybody was bidding out in 2017. So, that’s clearly a factor.”
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