Fed Governor Waller Suggests Possible July Rate Cut, Despite Market Skepticism
Key Points:
- Fed Governor Christopher Waller believes current monetary policy is too restrictive and suggests a July rate cut may be appropriate.
- Former President Trump has urged a dramatic 300 basis points cut.
- Markets remain unconvinced, with only a 6.7% chance priced in for a July 30 rate cut.
Federal Reserve Governor Christopher Waller has once again opened the door to a potential interest rate cut this month, even though market participants largely doubt it will happen. Speaking at an event hosted by the Federal Reserve Bank of Dallas, Waller said the Fed’s current stance is overly tight and should be reconsidered.
His comments follow the release of the June FOMC minutes and coincide with Donald Trump’s continued push for aggressive rate cuts. Trump has called for a 300 basis points reduction, arguing that inflation is no longer a concern and that market strength justifies lower rates.
Waller has previously hinted at the possibility of a July rate cut, emphasizing that inflation no longer poses a serious risk and that the Fed is well-positioned to ease monetary policy. He also urged policymakers to look past the inflationary impact of Trump’s proposed tariffs.
Meanwhile, Fed Chair Jerome Powell remains cautious, favoring a wait-and-see strategy to evaluate the economic impact of tariff-related uncertainties. Trump has criticized Powell’s stance and has even called for his resignation.
Despite Waller’s suggestions, market data suggests a cut is unlikely. Prediction market Polymarket estimates a 95% chance that rates will remain unchanged at the July 30 FOMC meeting. Similarly, CME FedWatch data puts the odds of a rate hold at 93.3%.
The decline in rate cut expectations comes on the heels of strong U.S. employment numbers released earlier this month, which reinforced the view that the economy remains robust and doesn’t warrant immediate monetary easing.
