Waller Says Fed Could Cut Interest Rates as Soon as July

Sophia Reyes · June 20, 2025 12:57 PM

Federal Reserve Governor Christopher Waller said the central bank could reduce interest rates as early as next month, restating his belief that the inflation impact from tariffs is likely temporary. “We could do this as early as July,” Waller said Friday during an interview on CNBC. The Federal Open Market Committee is scheduled to meet July 29-30 in Washington.

Waller noted that economic data indicate GDP growth and inflation are close to the Fed’s targets. He also believes the central bank’s benchmark rate is currently 1.25 to 1.5 percentage points above the estimated neutral level, where monetary policy neither slows nor stimulates the economy.

“I think we’ve got room to bring it down, and then we can kind of see what happens with inflation,” he said, adding that the Fed could pause rate cuts if necessary due to shocks such as the crisis in the Middle East. “We’ve been on pause for six months to wait and see, and so far the data has been fine.”

Waller’s remarks came after the Fed’s decision on Wednesday to hold interest rates steady for the fourth consecutive meeting. Fed Chair Jerome Powell said officials are preparing for the inflationary effects of President Trump’s tariffs and want to observe their impact before lowering rates.

The Fed also signaled expectations for two rate cuts before the end of 2025, according to their median forecast. However, seven policymakers indicated they anticipate no cuts this year, highlighting a divide within the committee.

No Cheap Financing

President Trump has repeatedly urged the Fed to lower interest rates, emphasizing how it could reduce the government’s debt servicing costs. Treasury data shows the government spent about $776 billion on interest payments over the past eight months.

This amount, now exceeding defense spending, reflects both the larger outstanding debt and the higher interest rates resulting from the Fed’s efforts to fight inflation.

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

When asked whether the Fed should cut rates to lower federal borrowing costs, Waller said that is not within the central bank’s mandate. “Our mandate from Congress tells us to worry about unemployment and price stability,” Waller said. “It does not tell us to provide cheap financing to the US government.”