The Blubber

“We could do this as early as July,” Fed Governor Christopher Waller said Friday in a CNBC interview, ahead of the Federal Open Market Committee meeting scheduled for July 29–30 in Washington.

Waller pointed out that current economic indicators—GDP growth and inflation—are close to the Federal Reserve’s policy goals. He believes the Fed’s key interest rate is now about 1.25 to 1.5 percentage points above the neutral level, where policy neither boosts nor hinders economic activity.

“I think we’ve got room to bring it down, and then we can kind of see what happens with inflation,” he noted. He also stressed that rate cuts could be paused if unexpected events—like the ongoing Middle East crisis—disrupt the economy. “We’ve been on pause for six months to wait and see, and so far the data has been fine.”

Waller’s comments follow Wednesday’s FOMC decision to maintain rates for the fourth meeting in a row. Chair Jerome Powell emphasized the Fed is monitoring the potential inflationary effects of President Trump’s tariffs before considering lowering rates.

Policymakers continued to expect two rate cuts before the end of 2025, based on the median projection. However, seven Fed officials suggested there would be no cuts this year, highlighting a divergence of views within the committee.

No Cheap Financing

President Trump has repeatedly urged the Fed to lower interest rates, arguing that lower rates would reduce the federal government’s debt servicing costs. Treasury data show the U.S. spent approximately $776 billion on interest over the past eight months—surpassing defense spending—due to increased debt levels and the Fed’s inflation-fighting measures.

“I would like to get this guy to lower interest rates, because if he doesn’t, we have to pay,” Trump said of Powell at a White House event on June 12.

When asked if the Fed should cut rates to lower the government’s borrowing costs, Waller firmly replied that “that was not part of the central bank’s mandate.”