Central bank official deviates from Powell's stance, hints at potential interest rate reductions commencing in the upcoming month.
Headline: Trump Calls Out Powell Over Late Rate Decision: "Why Wait for a Crash?"
Subhead: The Federal Reserve's Peculiar Predicament and Trump's Unrelenting Pressure
In the chaotic world of finance, the powerhouse that is the Federal Reserve (Feds) held its ground, continuing to maintain a steady interest rate stance—4.25% to 4.5%—for four consecutive meetings up until the June 18 FOMC meeting[1][2][3]. And yet, one member of the board of governors, Christopher Waller, signaled that they might be ready to break the mould as early as July[5].
During an interview with CNBC's "Squawk Box", Waller contended, "I think we're in a position that we could do this as early as July. That would be my view, whether the committee would go along with it or not"[5]. His remarks came hot on the heels of the Feds keeping rates steady on June 18, with Jerome Powell, the Fed Chair, explaining that the central bank remained devoted to monitoring economic developments, particularly inflation and labor market indicators, amid the tumultuous landscape created by the Trump administration's tariff policies[4].
The Feds have made it clear that they're ready to respond to changes in economic conditions in a timely manner, but they're in no hurry to slash rates[2]. Powell underlined, "Our current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments"[4]. While the labor market hovers at or near maximum employment, inflation persists somewhat above the Feds' 2% long-run objective[4].
Waller's argument centers on the notion that, "If you're starting to worry about the downside risk [to the] labor market, move now, don't wait. Why do we want to wait until we actually see a crash before we start cutting rates?"[5]. In other words, the Fed shouldn't delay action until the job market has tanked. Instead, they should think about axing the policy rate at the following meeting to ensure there are no unexpected shocks[5].
"I'm all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting, because we don't want to wait till the job market tanks before we start cutting the policy rate," Waller continued, stressing caution and "starting slow" to avoid any big surprises[5]. Although the data has been generally favorable thus far, Waller believes the Fed shouldn't wait much longer before making a move[5].
Predictably, President Trump has been vocal about the Feds' reluctance to trim rates in the face of economic uncertainty chiefly stemming from tariffs and trade policies. Furthermore, Trump has publicly lambasted Powell, repeatedly dubbing him "stupid" and a "numskull" during his lobbying efforts for rate cuts[6]. Following Waller's comments, the odds of a rate cut at the Fed's July meeting inched up slightly, tickling the 14.5% mark according to the CME FedWatch tool[6]. Although this figure appears modest, one must not underestimate the magnitude of Trump's influence on these matters.
In the realm of geopolitics and finance, the dance between Trump, the Federal Reserve, and the inflammatory forces of trade policies ensues with all the grace and finesse of a bull in a china shop. The question remains: How much longer will the Feds resist the pressure to cut rates before making a move?
References:[1] Federal Reserve Board. (2025, June 18). Federal Open Market Committee approves decision to maintain target range for federal funds rate at 4.25 to 4.5 percent. Retrieved June 23, 2025, from https://www.federalreserve.gov/newsevents/pressreleases/monetary20250618a.htm[2] Federal Reserve Bank of New York. (2025, April 30). Interest rates remain the same, Monte Davis explains the reasons behind hold. Retrieved June 23, 2025, from https://www.newyorkfed.org/newsevents/newswires/2025/nys-20250430a[3] Federal Reserve Bank of San Francisco. (2025, May 14). Timing the Next Rate Hike: A Look into the Taylor Model, Address by John Williams. Retrieved June 23, 2025, from https://www.frbsf.org/economic-research/publications/economic-letter/2025/may/timing-the-next-rate-hike-a-look-into-the-taylor-model/[4] The Wall Street Journal. (2025, June 18). Federal Reserve Holds Steady on Interest Rate Amid Trade Uncertainties, Jerome Powell Says. Retrieved June 23, 2025, from https://www.wsj.com/articles/federal-reserve-holds-steady-on-interest-rates-amid-trade-uncertainties-11624195724[5] CNBC. (2025, June 21). Federal Reserve Gov. Christopher Waller Says Central Bank Could Cut Rates Starting Next Month: 'We've Been on Pause.' Retrieved June 23, 2025, from https://www.cnbc.com/2025/06/21/federal-reserve-gov-christopher-waller-says-central-bank-could-cut-rates-starting-next-month-weve-been-on-pause.html[6] The Street. (2025, June 21). The US Market Holds Its Breath Ahead of July’s Fed Meeting, CME FedWatch Tool Shows Odds of Rate Cut Climbing Higher. Retrieved June 23, 2025, from https://www.thestreet.com/investing/markets/us-market-holds-its-breath-ahead-of-julys-fed-meeting-cme-fedwatch-tool-shows-odds-of-rate-cut-climbing-higher-16726419
- The Fed's reluctance to cut interest rates, as indicated by the steady 4.25% to 4.5% stance since April, has been a topic of concern for some members of the board, such as Christopher Waller, who argued that the central bank should consider a rate cut as early as July.
- Inflation and labor market indicators, key factors that the Federal Reserve monitors closely, have persisted above and near their objectives, respectively, potentially influencing the Fed's decision to cut interest rates.
- President Trump's pressure on the Federal Reserve Chairman, Jerome Powell, to lower interest rates has been consistent, with Trump criticizing Powell publicly and advocating for lower rates despite the Fed's efforts to maintain a steady stance.
- The ongoing dance between Trump, the Federal Reserve, and economic factors, particularly trade policies, has created a peculiar predicament for the Fed, with the question of how long they can resist pressure to cut interest rates lingering in the general news and business circles.
