By Matt Grossman
Federal Reserve governor Christopher Waller said the central bank could be positioned to cut interest rates at its next meeting in July, notwithstanding potential inflation pressures caused by new tariffs.
In a Friday morning interview with CNBC, Waller said the Fed should "look through" one-time price increases from tariffs and instead respond to the underlying trend in inflation, which has been cooling.
Waller's comments reaffirm his role as the central bank's most vocal advocate for a return to rate reductions since the Fed paused its cuts in January.
"I think we've got room to bring it down, and then we can kind of see what happens with inflation," Waller said. The Fed could then pause rate cuts again if inflation worsens, he added.
Waller noted that his colleagues on the Fed's policy-setting committee might not agree with his timetable. On Wednesday, the group unanimously decided to hold interest rates steady, standing pat for the fourth straight meeting. In a press conference after the meeting, Fed Chair Jerome Powell said the Fed's current stance is well-positioned to respond to risks in a highly uncertain economy.
Inflation has moved lower in recent months. By the Fed's preferred metric, prices rose 2.1% in the 12 months through April, the most recent month of data. Many economists expect it will tick higher again as tariffs work their way through the economy. Waller said that interest rates are likely still far enough above a neutral level, however, that the Fed could begin cutting rates again gradually, monitor inflation, and then pause cuts again in the future to lean against price increases if they threaten to get out of hand.
"We should be basing policy based on the data," Waller said in the interview, arguing that prospective inflation caused by tariffs would likely be temporary.
In projections submitted for Wednesday's meeting, the median Fed official still expects the central bank to cut rates twice this year. But most on Wall Street don't think the first cut will come before September. Market positioning before Waller's interview suggested an 86% probability the Fed will hold rates steady in July.
President Trump's insistence that the Fed cut rates has hefted political pressure on the central bank's path forward. Before and after Wednesday's decision, Trump lambasted Powell for leading a Fed that has put rate cuts on hold, arguing that the Fed chair has a record of acting "too late."
"What everyone on the Federal Open Market Committee wants is a good, solid American economy with a strong labor market and price stability," Powell said in response to a reporter's question about Trump's criticism, referring to the Fed's rate-setting committee.
Trump will have the opportunity to nominate Powell's successor as Fed chair next year.
Write to Matt Grossman at matt.grossman@wsj.com
(END) Dow Jones Newswires
06-20-25 0949ET
