Waller Says The Fed Could Cut Rates As Soon As July

Federal Reserve Governor Christopher Waller indicated on Friday that the U.S. central bank could begin easing monetary policy in relatively short order, raising the possibility of a rate cut at the Federal Open Market Committee’s next gathering on July 29‑30. Speaking in a live interview, Waller laid out a scenario in which officials trim borrowing costs once at the upcoming meeting, then pause to observe how inflation and economic activity evolve before contemplating any additional moves. 

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“We could do this as early as July,” Waller said when asked whether the Fed might lower its benchmark interest rate in the near term. He emphasized that recent data suggest the economy has cooled enough to justify a modest reduction, noting that real‑time gauges of price pressures have been trending lower. “I think we’ve got room to bring it down, and then we can kind of see what happens with inflation,” he explained, adding that policymakers retain the option to pause further cuts if subsequent data argue for caution. 

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Waller’s remarks came just two days after the FOMC voted unanimously to keep the federal‑funds target unchanged, leaving the range at 5.25 percent to 5.50 percent for a fourth consecutive meeting. At that gathering, the committee also updated its quarterly “dot plot,” a chart that records each participant’s preferred path for short‑term rates over the next several years. 

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The median projection still calls for two quarter‑point cuts before the end of 2025, but the spread of opinions revealed growing disagreement. Seven of the nineteen officials now believe it would be prudent to leave rates untouched through December, up from four dissent‑leaning dots in March. 

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The divergence reflects the delicate balance policymakers must strike as they weigh incoming evidence of slowing growth against lingering pockets of inflationary pressure. Earlier this year, monthly readings on consumer prices suggested that last year’s disinflationary momentum had stalled. Shelter costs remained stubborn, and newly announced tariffs on a range of imported goods raised concerns about a renewed bout of price pass‑through. 

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More recently, however, several indicators—including core Personal Consumption Expenditures inflation and surveys of medium‑term expectations—have pointed to a gradual cooling. 

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Waller, generally viewed as one of the committee’s more pragmatic voices, argued that a small early cut could help ensure the economy stays on track without reigniting demand‑driven inflation. He framed the July meeting as an opportunity to shift policy “a little further away from the most restrictive stance,” calling the move reversible should prices fail to moderate as hoped. The governor added that if inflation surprises on the upside later this summer, officials could skip additional reductions or even pause the easing cycle altogether. 

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Market participants have been edging toward a similar view. Fed‑funds futures now imply roughly a one‑in‑three chance of a July cut, and traders see slightly better than even odds of at least one reduction by September. Treasury yields, which influence everything from mortgage rates to corporate borrowing costs, have drifted lower on signs that the labor market is cooling and global geopolitical risks—particularly in energy markets—remain contained. 

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Waller acknowledged that part of the committee’s caution stems from uncertainty about President Donald Trump’s evolving trade policies, which could push import prices higher and complicate the inflation outlook. 

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While tariffs can raise costs in the short run, the broader impact on consumer prices depends on whether businesses absorb the levies or pass them along. The Fed, Waller said, must remain “nimble and data‑dependent,” ready to adjust its stance as supply‑chain dynamics and global demand shift. 

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That nimbleness includes a willingness to pause between moves, a strategy Waller likened to “taking a step, checking the terrain, then deciding whether it’s safe to move again.” Such an incremental approach has precedent: in the mid‑1990s and again in 2019, the Fed lowered rates, waited for fresh data, and then resumed easing when inflation stayed contained. Critics of a stop‑and‑go tactic argue it could create uncertainty for businesses and households, but proponents contend that it limits the risk of over‑correcting and stoking a new inflation surge. 

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Within the FOMC itself, the seven officials signaling no cuts this year suggest that a meaningful faction remains unconvinced that price pressures are firmly on a downward trajectory. These policymakers worry that loosening too soon could reverse recent progress toward the Fed’s 2 percent inflation goal, especially if consumer demand rebounds or supply constraints flare anew. 

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The tension between that camp and doves who favor an earlier move underpins what Waller called a “healthy debate” about how best to secure a soft landing—slower growth without recession—while guiding inflation back to target. 

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For now, the committee’s consensus remains that two cuts by the end of next year are appropriate, though the timing and distribution of those reductions are in flux. If the Fed takes Waller’s suggested path, it could front‑load one adjustment this summer, pause in the fall, and potentially deliver a second quarter‑point trim sometime in 2025 if conditions warrant. Conversely, if inflation proves stickier, officials could delay the first cut until later in the year or even maintain the current rate plateau into 2026. 

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Ultimately, Waller’s comments highlight just how contingent the policy outlook has become. With growth moderating, inflation easing but still above target, and geopolitical events continuing to threaten commodity markets, the Fed must navigate a narrow corridor. 

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The July 29‑30 meeting now looms as a crucial inflection point: a chance either to signal the first step toward normalizing policy or to reaffirm its patient stance. Investors will be reading every data point and every official remark between now and then for clues, but as Waller made clear, the final decision will hinge not on forecasts but on the numbers in hand when the committee convenes in Washington. 

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