Fed is considering rate cuts 'as early as July meeting’ in potential concession to Trump

Federal Reserve Governor Christopher Waller said on Friday that interest rate cuts could begin as soon as next month, aligning with US President Donald Trump’s plea. In an interview on CNBC’s Squawk Box, Waller said policymakers should not wait for economic conditions to deteriorate before acting.

“I think we’re in the position that we could do this and as early as July,” Waller remarked, hinting at a potential rate cut at the July 29–30 Federal Open Market Committee (FOMC) meeting. “That would be my view, whether the committee would go along with it or not.”

Waller’s remarks follow Wednesday’s decision by the FOMC to hold its benchmark interest rate at a range of 4.25% to 4.5%, the fourth consecutive pause since the last cut in December 2024. 

Trump turns up heat on Powell and the Fed

President Trump, who appointed Jerome Powell as Fed Chair and nominated Waller during his first term, has argued that higher rates are choking economic growth and driving up the cost of servicing the $36 trillion national debt. 

He has called for at least a two percentage point reduction, even suggesting rates should fall 2.5 points below their current level. Powell has so far resisted those demands, but his grip may be loosening. Still, the Fed chair insists that the central bank should proceed cautiously. 

Waller’s recent comments show there’s an internal push for at least a modest rate cut,  which will be the first since Trump’s return to the White House.

“Why do we want to wait until we actually see a crash before we start cutting rates?” he asked. “I’m all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting.”

Fed governors ‘divided’ over rate cuts

Although Waller is a voting member of the FOMC, Wednesday’s rate decision was unanimous. According to the Fed’s “dot plot,” which outlines individual policymakers’ forecasts, seven of 19 officials expect no change in rates through the end of the year. 

Yet, two anticipate a single cut, while 10 project two or more reductions in 2025. There could be a significant split within the central bank.

According to the prediction platform Polymarket, there is an 89% chance the Fed will keep rates unchanged in July, with only 10% betting on a 25 basis point cut.

Waller admitted that although he prefers a rate cut, they should be gradual. “You’d want to start slow and bring them down, just to make sure that there’s no big surprises. But start the process,” he continued, “We’ve been on pause for six months to wait and see, and so far, the data has been fine.”

Powell: Tariffs could spike inflation

During a press conference on Wednesday, Powell claimed that new trade barriers are beginning to push up consumer prices. “We’re beginning to see some effects,” he reckoned. “Inflation is creeping up,” and recent data shows that “near-term measures of inflation expectations have moved up” across consumer and market surveys.

The Fed chair directly blamed Trump’s tariffs as the culprit, saying that survey respondents view them as the driver behind inflationary pressures. 

Still, Waller pushed back on the idea that tariffs will cause lasting damage. He argued that their effect should be “a one-off level effect and not cause persistent inflation.” 

“We believe we can stay in wait-and-see mode,” Powell told the press in his address. He mentioned that the inflation data has shown minimal pass-through so far because companies are still working through inventory stockpiled ahead of tariff implementation. Weak consumer demand has also limited pricing power, providing the Fed with some room to maneuver.

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