Federal Reserve Governor Christopher Waller signaled that the central bank could consider cutting interest rates as early as this month. Speaking at a Dallas Fed event, Waller highlighted that current monetary policy may be “overly tight” given the backdrop of stable inflation and resilient employment data.
Waller downplayed recent price spikes tied to new tariffs, describing them as temporary and not enough to justify maintaining high rates. With the federal funds rate anchored between 5.25% and 5.50%, he suggested the Fed might need to act sooner rather than later to ensure economic momentum isn’t stifled.
The possibility of a July cut marks a notable shift in tone. While Waller and fellow policymaker Michelle Bowman appear open to a move this month, most Fed officials remain cautious, preferring to wait for additional economic data before adjusting policy. Mary Daly, another influential voice on the committee, still sees room for two rate cuts in 2025, but likely concentrated in the fall.
Market reactions were swift. Treasury yields edged lower and equity markets held near recent highs, reflecting investor optimism that borrowing costs may soon decline. Bitcoin and other risk assets also found support, buoyed by the prospect of easier financial conditions.
Looking ahead, much will hinge on fresh inflation and labor market figures due before the Fed’s next meeting on July 29–30. A strong print could delay action, while any signs of cooling might pave the way for the first rate cut in over a year.
This sets the stage for a crucial policy moment. A July rate cut would not only advance market timelines but also test the Fed’s balancing act between supporting growth and keeping long-term inflation expectations anchored. The coming weeks will be pivotal in determining whether the central bank stands firm or decides to pivot earlier than anticipated.
