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Investing.com -- Federal Reserve Governor Christopher J. Waller explained his dissent from the Federal Open Market Committee’s (FOMC) July decision, stating he favored a 25 basis point rate cut.
In a statement released Friday, Waller outlined three key reasons for his position. First, he argued that tariffs create only temporary price level increases rather than persistent inflation, and central banks typically "look through" such effects when inflation expectations remain anchored.
Second, Waller pointed to economic data suggesting monetary policy should be closer to neutral rather than restrictive. He noted that real GDP growth was just 1.2% in the first half of 2025 and is expected to remain soft, while unemployment stands at 4.1%, near the Committee’s longer-run estimate. With inflation slightly above 2% excluding temporary tariff effects, Waller believes the policy rate should be around the neutral rate of 3%, not 1.25 to 1.50 percentage points higher.
Finally, Waller expressed concern about labor market risks, stating that private-sector payroll growth is "near stall speed" once expected data revisions are factored in. He argued the Fed shouldn’t wait for labor market deterioration before cutting rates, especially with inflation near target.
While respecting his colleagues’ "wait and see" approach regarding tariff effects, Waller characterized this stance as "overly cautious" and potentially causing policy to "fall behind the curve." He emphasized that tariff price effects have been minimal so far, and waiting for complete clarity on tariffs could be problematic if labor markets deteriorate rapidly in the meantime.
Waller clarified that his position doesn’t commit the FOMC to a predetermined rate cut path. "We can cut now and see how the data evolves," he stated, adding that the committee could pause if significant inflation surprises emerge, but saw "no reason" to maintain current rates and risk labor market decline.
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