Key Points:
Rate Cuts Urged by Fed Insider: Federal Reserve Governor Christopher Waller suggests the Fed should begin lowering interest rates as early as July.
Labor Market Showing Cracks: Waller points to early signs of a weakening labor market, especially youth unemployment, as justification for cuts.
Political Implications Loom: With Trump’s reelection and Powell’s term ending in 2026, Waller is now a contender for the next Fed chair.
In a rare alignment with President Donald Trump, Federal Reserve Governor Christopher Waller called Friday for the central bank to begin cutting interest rates, potentially as soon as next month. The suggestion adds to mounting political and economic pressure on the Fed amid signs that the U.S. labor market may be cooling.
Waller made the remarks during a CNBC interview, emphasizing that recent tariffs imposed by Trump are unlikely to cause sustained inflation. “We’re in a good spot right now for talking about bringing the rate down,” he said, although he stopped short of endorsing Trump’s aggressive call for a 2.5-point slash.
Trump has spent months criticizing the Fed, and Chair Jerome Powell in particular, for holding interest rates too high. While the Fed maintains its independence, Trump has ramped up rhetoric and has promised to name Powell’s successor well before his term ends in May 2026. Waller, who was appointed by Trump in 2020, is now reportedly a top contender alongside former Fed governor Kevin Warsh and current Treasury Secretary Scott Bessent.
The push for rate cuts comes amid growing concerns about a labor market slowdown. Waller noted rising youth unemployment and subtle signs of weakness compared to the more robust conditions of 2022. “Maybe the labor market is starting to soften more than we might want it to,” he said, urging preemptive action to avoid deeper trouble.
The Fed has held off on reducing rates, citing uncertainty around Trump’s economic policies, especially trade tariffs. But Waller’s view diverges from most of his colleagues, who prefer a wait-and-see approach. He argues that the risk of inaction is now greater: “Why do we want to wait until we actually see a crash before we start cutting rates?”
Despite inflation remaining under control and job growth persisting, Waller’s comments mark a significant shift within the Fed’s leadership, one that may reshape the central bank’s trajectory and influence the broader U.S. economic outlook heading into 2026.
