Fed Governor Christopher Waller reinforced his call for a July rate cut, arguing that the policy rate is too restrictive given current economic conditions.
In a speech, Waller emphasized that recent tariffs will only cause a “temporary surge” in prices, not a sustained increase in inflation, and that standard monetary policy practice is to “look through” such one-off price-level shocks as long as expectations remain anchored.
Waller pointed to sluggish growth and moderate inflation as reasons for a cut. He noted that real GDP likely expanded just 1% in the first half of 2025 and is expected to remain soft for the rest of the year—well below FOMC estimates of longer-run growth. With unemployment near 4.1% and inflation close to 2% when tariff effects are stripped out, Waller said policy “policy rate should be around neutral”, not nearly 125–150 basis points above the estimated neutral rate of 3%.
Waller also flagged labor market fragility, suggesting that once data revisions are accounted for, private payroll growth is “near stall speed.” With risks to jobs increasing and inflation pressures fading, Waller said, “We should not wait until the labor market deteriorates before we cut the policy rate.”
