Fed Governor Christopher Waller signaled openness to a rate cut as early as July, citing minimal inflation risks from US tariffs and mounting concerns over the labor market.

In an interview with CNBC, Waller said, “I think we’re in the position that we could do this and as early as July,” while acknowledging it’s uncertain whether the broader committee will align with that view.

Waller emphasized the risks of delaying action, warning against waiting for a clear downturn in employment. “If you’re starting to worry about the downside risk labor market move now don’t wait,” he argued.

Regarding tariffs, Waller dismissed concerns that they would create sustained inflationary pressure, reiterating that the price effects should be limited and one-off.

“Even if the tariffs come in later, the impacts are still the same,” he said, calling for the Fed to “start thinking about cutting the policy rate at the next meeting”, after pausing the easing cycle for six months.

Dollar soars on hawkish comments from Fed Chair Jerome Powell. He indicated that ultimate level of interests is “likely to be higher than previously anticipated”. Fed is also “prepared to increase the pace of rate hikes”. He also warned against “prematurely loosening policy.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in the prepared remarks for the semi-annual testimony to Congress.

Additionally, “if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” he added.

“Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored,” Powell emphasized. “Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run.”

“The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done,” he said.

Full remarks here.

New York Fed President John Williams said that “maybe we are near the bottom in terms of the economic downturn”. There could be a “pretty significant” rebound in the second half of the year. Nevertheless, he still cautioned that “even if we are starting to see perhaps a stabilization there in terms of the economy and maybe a little bit of a pickup, we’re still in a very difficult situation.”

Regarding monetary policy, Williams said Fed is “thinking very hard” targeting specific yields on Treasuries.  “Yield-curve control, which has now been used in a few other countries, is I think a tool that can complement -– potentially complement –- forward guidance and our other policy actions.”

“So this is something that obviously we’re thinking very hard about. We’re analyzing not only what’s happened in other countries but also how that may work in the United States.”

Philadelphia Fed President Patrick Harker and Boston Fed President Susan Collins have both indicated their support for beginning a gradual reduction in interest rates, assuming no unexpected changes in economic data.

Harker emphasized that the process should start soon, stating, “barring any surprise in the data we’ll get between now and then, I think we need to start this process.” He also noted that the pace of rate cuts should be “slow and methodical.”

Collins echoed this sentiment, highlighting the progress made in reducing inflation. She remarked, “We’ve seen quite a lot of reduction in inflation,” and expressed confidence that the economy is on the right path.

Collins also underscored the importance of a “gradual, methodical pace” in the rate-cutting process to maintain the health of the labor market.