Top Federal Reserve official calls for rate cuts as soon as July

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The US Federal Reserve should begin cutting interest rates as soon as next month, a top official has said, underscoring the deepening schism at the central bank on whether to reduce borrowing costs this year.

Fed governor Christopher Waller, a top contender to succeed chair Jay Powell, said that economic data supported lowering rates in the near-term despite the threat of higher inflation from President Donald Trump’s tariffs.

“I think we’re in that position and that we could do this as early as July,” Waller, who joined the Fed’s policy-setting panel in 2020 after being nominated by Trump during his first term, told CNBC on Friday.

“You’d want to start slow and bring them down just to make sure that there’s no big surprises. But start the process. That’s the key thing.”

Fed policymakers are divided on whether to lower rates at all this year amid fears that tariff turbulence could cause a fresh surge in inflation while also cooling economic growth.

The Federal Open Market Committee this week opted to hold rates steady in a range of 4.25-4.5 per cent for the fourth consecutive meeting, even as Trump piles pressure on Powell, whose term as Fed chair expires in May 2026, to slash them.

Ten members of the committee forecast two or more quarter-point cuts by the end of the year, while seven forecast none. Two expect just one cut.

Powell said on Wednesday “We are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance” and warned “our job is to make sure that a one-time increase in inflation doesn’t turn into an inflation problem.”

But Waller said that any serious tariff price impact had yet to materialise and would be a once-off effect when it did.

“We’ve been on pause for six months thinking that there was going to be a big tariff shock to inflation. We haven’t seen it,” he said. “We should be basing policy . . . on the data.”

“I don’t think we need to wait much longer, because even if the tariffs come in later, the impacts are still the same, it should be a one-off level effect and not cause persistent inflation.”

Trump lashed out at Powell following this week’s FOMC decision and said rates should be 2.5 percentage points lower in order to reduce the cost of interest payments on US government debt.

“‘Too Late’ Jerome Powell is costing our Country Hundreds of Billions of Dollars. He is truly one of the dumbest, and most destructive, people in Government, and the Fed Board is complicit,” the president wrote on his Truth Social platform on Thursday.

Asked about the president’s comments, Waller insisted that for the Fed, it “not our job” to address the cost of financing government debt.

“Our mandate from Congress tells us to worry about unemployment and price stability, and that’s what we’re doing. It does not tell us to provide cheap financing to the US government,” he said.

“That is really the job of Congress and the Treasury to make sure you have a fiscal situation that is sustainable that will bring the deficits down and that will put downward pressure on interest rates all by itself.”