Fed Governor Waller Urges July Rate Cut
Christopher J. Waller says the central bank should not wait until autumn to ease policy. Speaking to the Money Marketeers of New York University on July 17th, he argued for a 25-basis-point trim to the federal-funds target range “in two weeks.” With growth fizzling, hiring sputtering, and tariffs muddying the inflation picture, Waller believes quick action would keep the Federal Open Market Committee (FOMC) from “falling behind the curve.”
The fed-funds band of 4.25 %–4.5 % now sits a hefty 125–150 basis points above the Committee’s own 3 % “neutral” estimate—terrain Waller openly calls restrictive. GDP expanded at barely a 1 % annual rate in the first half of 2025, down from 2.8 % late last year, while real consumer spending has slowed to the same anemic 1 % clip. The July 16th Beige Book showed only “slight or modest gains” in five of twelve Fed Districts, with seven reporting flat or declining activity. Soft June retail sales underline a household sector that, after two years of real-wage erosion, finally seems to be buckling.
Labor, the lone bright spot of 2023-24, is wobbling as well. Headline unemployment is 4.1 %, yet private-sector payrolls grew just 74,000 in June and may be “much closer to zero” after coming benchmark revisions, according to Waller. ADP data already show a 33,000 job decline, and the New York Fed pegs the unemployment rate for recent college grads at a decade-high 5.8 %. Waller labels the market “on the edge”: hiring is weak even though layoffs remain subdued—often a precursor to broader job cuts. Waiting until September, he warns, risks tightening into an economy that can ill afford it.
Inflation gives the dovish faction cover. June numbers imply headline PCE at 2.5 % and core at 2.7 %, but roughly 0.3 percentage point stems from one-time tariff spikes. Stripping those out, Fed staff argue underlying inflation is “quite close” to the 2 % target, helped by slower wage gains and better productivity. Most FOMC members already penciled in at least two 2025 cuts in June’s projections; acting in July leaves room to pause later if the data misbehave. As Waller put it, “For this reason, I believe it makes sense to cut the FOMC’s policy rate by 25 basis points two weeks from now.”
Whether or not the Committee pulls the trigger on July 30th, the backdrop is unmistakable: growth is stalling, labor momentum fading, and inflation progress hinging on spreadsheets that exclude politically driven tariffs. In that environment, the yellow metal’s new highs may be telling a story policymakers would rather not hear.
