US Fed rate outlook: Governor Waller signals possible July rate cut; says tariff impact may be 'one-off' and shouldn't delay easing

A US Federal Reserve official said Friday that the central bank could start cutting interest rates as soon as next month, signaling flexibility amid global economic uncertainty and rising geopolitical risks.

“We can start the process of bringing rates down, and then if there's some big shock due to maybe the Middle East conflict, we can pause,” Fed governor Christopher Waller said in an interview with CNBC, AFP reported. “I think we're in that position that we could do this, and as early as July,” he added.

The remarks come days after the Federal Open Market Committee (FOMC) kept the benchmark interest rate unchanged in the range of 4.25–4.50% for the fourth straight time. While President Donald Trump has repeatedly pressed the Fed to cut rates, Chair Jerome Powell said on Wednesday that the central bank would act cautiously, waiting to assess the impact of Trump’s tariffs on inflation and growth.

“I think you'd want to start slow,” Waller said. “But start the process, that's the key thing.”

Waller argued that central banks should “look through tariff effects on inflation” and instead focus on underlying price trends. Even if the tariffs pushed prices up temporarily, he said, it would likely be a “one-off level effect” that should not result in persistent inflation.

His comments highlight a growing divide among Fed policymakers on the path forward. Powell had said Wednesday that while tariff effects could prove temporary, the Fed is “well-positioned to wait to learn more” before considering a shift in policy.

Waller also rejected Trump’s recent suggestion that rate cuts could reduce debt-servicing costs. “Our mandate from Congress tells us to worry about unemployment and price stability, and that's what we're doing,” he said, adding, “It does not tell us to provide cheap financing to the US government.”