Fed official: ‘The time has come’ to cut interest rates 

The debate over whether the Federal Reserve should cut short-term interest rates continues to intensify, with Fed Gov. Christopher Waller now strengthening his earlier push for the central bank to lower rates during its July meeting.

The Fed has kept rates frozen since December 2024, a decision Fed Chair Jerome Powell has repeatedly defended amid calls from President Donald Trump to lower rates. The Fed itself appears to be split on what to do next, with some Board of Governors members publicly voicing support for a cut.

Waller, who told CNBC last month that he believes the economy is "in a good spot right now for talking about bringing the rate down," took a firm stance on the issue while addressing the Money Marketeers of New York University in New York City this week.

Many variables support a July cut: In his July 17 speech titled "The Case for Cutting Now," Waller outlined why he is advocating for a rate cut at the Fed's July 29-30 meeting. Soft real GDP growth, low unemployment and near-target inflation rates are all reasons to cut short-term interest rates, he said. And while the U.S. Bureau of Labor Statistics' June jobs report indicated the labor market is strong, Waller sees "reasons to be concerned" about private sector employment — another reason he listed for cutting rates soon.

Overblown tariff concerns? Waller also argued that uncertainty about tariff impacts should not hold the Fed back. Powell has often cited the tariffs Trump introduced earlier this year as a key reason for keeping rates steady due to risks of rising inflation.

But tariffs "are one-off increases in the price level and do not cause inflation beyond a temporary surge," Waller said, later adding that he believes "a large share of tariff increases won't be passed through to consumers."

2 cuts still possible in 2025: All in all, Waller declared that "the time has come" to start lowering rates — and he thinks "the risks to the economy are weighted toward cutting sooner rather than later."

Just last month, a majority of Federal Open Market Committee members "believed it would be appropriate to reduce our policy rate at least two times" this year, he said, and with only four meetings to go, time is running out.

"I believe it makes sense to cut the FOMC's policy rate by 25 basis points two weeks from now," Waller said.

And if inflation doesn't rise much more as the year progresses? "I would support further 25 basis point cuts to move monetary policy toward neutral," he concluded.