Washington
CNN
–

Christopher Waller, a member of the Federal Reserve’s Board of Governors, indicated on Friday that the central bank should consider initiating interest rate cuts as early as July. This aligns with previous calls from President Donald Trump for reduced borrowing costs.

During an interview with CNBC, Waller commented that the anticipated impact of President Trump’s tariffs on imported goods would likely be limited. He suggested that central bankers should “look through these type of price shocks” because they are likely to cause only a “one-off” increase in inflation.

“We’re in a good spot right now for talking about bringing the rate down,” Waller stated.

However, he did not advocate for the significant rate cuts that President Trump has been pushing for, suggesting instead that the fed should “start slow.”

President Trump has consistently criticized the Fed and its chairman, Jerome Powell, for their perceived slowness in lowering rates, arguing that the US central bank is lagging behind its European counterparts. He has claimed that the federal government is burdened with importent interest rate payments on its debt due to the Fed’s reluctance to lower borrowing costs.

However, the Fed’s rate decisions are independent of the government’s financial situation. As Jerome Powell explained in a recent press conference, the primary reason for maintaining current rates is to assess the effects of President Trump’s policies on the US economy. This approach has been echoed in recent statements by other Fed officials.

The Fed’s mandate from Congress is to maximize employment and stabilize prices. Currently, inflation remains moderate, unaffected by President Trump’s tariffs thus far, although many economists predict a future increase. The labor market also remains relatively healthy.

Waller,though,pointed to emerging signs of weakness in the job market,such as high youth unemployment,as justification for immediate rate cuts,especially given the current low inflation.

Waller’s recent remarks come as President Trump is actively considering candidates to succeed jerome Powell.

President Trump announced last week that he would reveal his choice for Fed chair “very soon,” well before Jerome Powell’s term concludes in May 2026. President Trump’s dissatisfaction with jerome Powell stems from his first term, largely due to Jerome Powell’s resistance to lowering rates as demanded.

Jerome Powell consistently emphasizes that the Fed’s decisions are based solely on economic data.

With Jerome Powell’s term nearing its end, potential candidates for the Fed’s top position include Kevin Warsh, a former Fed governor; Treasury Secretary Scott Bessent; and Waller, who was appointed to his current position by President Trump in 2020.

If President Trump announces his nominee significantly before next may, this individual will be seen as the “shadow” Fed chair, a situation unprecedented in the Fed’s history, according to monetary policy scholars. No US president has ever named their Fed chair nominee so far in advance.

The health of the labor market is a critical factor for Fed officials when considering rate cuts. A decline in hiring and a rise in unemployment could prompt the Fed to lower rates, even if inflation increases due to tariffs.

“The labor market is okay, but it’s not strong like it was in 2022,” Waller explained. This suggests that higher inflation is unlikely to become entrenched because workers lack the bargaining power to demand higher wages to compensate for price increases-what Waller termed “second-round effects.”

Other Fed officials have noted a gradual weakening of the labor market over the past two years, although it remains stable. Unemployment has remained below 4.2% as October 2021, and employers have continued to create jobs in recent months.

However, Waller diverges from other Fed officials by advocating for preemptive rate cuts to avert a potential deterioration of the labor market.

“Maybe the labor market is starting to soften more than we might want it to… so you’re starting to worry about the downside risks to the labor market,” waller cautioned. “Move now, don’t wait.”

“Why do we want to wait until we actually see a crash before we start cutting rates?” he added.