With the next Federal Open Market Committee (FOMC) meeting just around the corner on July 29–30, all eyes are on whether the Fed will finally deliver another rate cut. According to Federal Reserve Governor Christopher J. Waller, the answer should be a confident “yes.”
Speaking recently at the Money Marketeers of New York University, Waller laid out a compelling case for a 25-basis-point cut, marking what could be the first rate move since December 2024, when the Fed trimmed the benchmark rate from 4.50% to 4.25%.
Inflation? Tariffs Aren’t the Villain
Let’s talk about the elephant in the economy: inflation. Or more specifically, the recent uptick some are blaming on tariffs. Waller dismissed the idea that these tariffs will spark long-term inflation, calling them “one-off increases” that may cause short-term price bumps but nothing worthy of a policy panic.
“Standard central banking practice is to ‘look through’ such price-level effects as long as inflation expectations are anchored, which they are,” Waller explained.
Translation? The Fed isn’t about to slam the brakes on the economy just because of a few blips in pricing caused by trade policy.
Neutral, Not Restrictive
Waller emphasized that current economic conditions don’t call for aggressive tightening. In fact, he argued that monetary policy should be “close to neutral.” That means we’re not trying to cool things off or heat them up — just keeping a steady hand on the wheel.
“In the absence of an unanchoring of inflation expectations and an acceleration of wage growth, which we have not seen, tariffs won’t and can’t permanently increase the inflation rate,” he said.
His point: the Fed should avoid tightening policy unnecessarily and risk damaging the economy over temporary inflation noise.
The Labor Market: Not as Strong as It Looks
While Fed Chair Jerome Powell and Vice Chair Michael Barr have praised the labor market’s overall strength, Waller took a deeper look — and what he found is a bit more sobering.
The June jobs report may have looked solid on the surface (with unemployment at 4.1% and 147,000 new payroll jobs), but Waller pointed out that private-sector payroll growth is nearing stall speed. And that’s where the real concern lies.
“Private-sector employment is the lion’s share of employment and a better guide to the cyclical movement,” Waller said.
Of those June jobs, 74,000 came from the public sector, which tends to be more stable and less sensitive to economic shifts. Waller warned against waiting for job losses to spiral before taking action.
Bottom Line: Policy Should Be Proactive, Not Reactive
Waller wrapped up his speech by reinforcing his main message — inflation is near target, the labor market is softening under the surface, and the impact of tariffs is not a long-term inflation driver.
“Tariffs have boosted, and will continue to boost, inflation a bit above the FOMC’s 2 percent objective this year, but policy should look through tariff effects,” he said.
What This Means for You
If you’re in real estate, investing, or just watching rates with bated breath, Waller’s speech could be a sign of relief. With inflation behaving and job growth slowing, the Fed may be gearing up to cut rates as early as this month. That’s good news for buyers, borrowers, and anyone with eyes on financing in the second half of 2025.
Stay tuned — this month’s FOMC meeting could shift the economic landscape just in time for fall.
