The Federal Reserve's Powell supports interest rate cuts in July: "Don't wait for the market to collapse before taking action."

Federal Reserve Board member Waller said on Friday that he expects the tariff policy to not significantly push up inflation, so policy makers should consider cutting interest rates as early as next month. The central bank official pointed out in an interview that, although a gradual adjustment should be taken, given the fading inflation threat, loose monetary policy is already in place to be activated. Waller said, "I think we have the conditions for a rate cut, potentially in July. That's my view, but it's uncertain whether the committee will agree." Just two days ago, the Federal Open Market Committee (FOMC) voted to keep the benchmark interest rate unchanged, marking the fourth consecutive time the rate has been maintained unchanged since the rate cut in December last year. It is worth noting that Waller was a Fed official nominated by Trump. Recently, Trump has continued to pressure the Fed to lower interest rates in order to alleviate the interest burden of the $36 trillion national debt. Waller emphasized in his speech that, in order to avoid potential weakness in the labor market, the Fed should take proactive action. "If there are concerns about downside risks in the labor market, action should be taken now, not wait," he emphasized. "Why wait for a market collapse to start cutting rates? I fully support considering a policy rate cut at the next meeting, because we don't want to wait until the job market collapses before taking action." However, it remains uncertain whether Waller's stance will garner majority support. This week, FOMC members, including Waller, unanimously voted to keep the interest rate unchanged at the meeting, maintaining the federal fund rate target range at 4.25% - 4.5%. According to the officials' "dot plot" showing their rate expectations for the year, out of 19 decision-makers, 7 believe rates will remain unchanged, 2 expect only one rate cut, and the remaining 10 anticipate two to three rate cuts. This divergence reflects the uncertainty among policy makers regarding the direction of interest rates. Trump had previously called for aggressive rate cuts, suggesting that the benchmark rate should be lowered by at least 2 percentage points, or even suggesting it be lowered by 2.5 percentage points below the current 4.33% level. But Waller said the committee should take a gradual approach to rate cuts. "You would want to start the rate cut process slowly, making sure there are no major surprises. The key is to take the first step," he explained. "We've paused the rate hikes for six months to observe, and the data are performing well... I don't think we need to wait much longer, because even if the tariff policy comes into effect, its impact will be consistent: it's a one-time level shock, not a sustained inflationary pressure." Other officials hold a cautious stance towards rate cuts, as they are still monitoring the long-term impact of Trump's tariff policy - mainly related to inflation, as well as the labor market and overall economic growth. Fed Chair Powell has repeatedly emphasized in the press conference after Wednesday's meeting that, given the continued strength of the labor market, the Fed can afford to wait and see. Recent inflation data shows that there are almost no signs of inflation transmission due to concerns over accumulated inventories before the announcement of the tariff policy, as well as worries about consumer demand slowing down and weakening pricing power. Futures market pricing shows that the likelihood of a rate cut at the July 29-30 meeting is slim, with market expectations leaning towards the next action in September.