Fed’s Christopher Waller Signals July Rate Cut May Hinge On Private Sector Weakness

Federal Reserve Governor Christopher Waller said on Friday that unemployment in the private sector is the reason he may recommend a rate cut in the July Federal Reserve meeting.

“The headline numbers for the labour market that we’re seeing are okay. But, when you get underneath and start looking at the data, the private sector is not doing as well as everybody thinks it is,” Waller told Bloomberg. “Half of the unemployment growth we saw last month was in the public sector, that means private sector isn’t doing too well.”

Waller also said that if President Donald Trump asked him to become the next Federal Reserve Chairman, he would be happy to say yes. 

The Fed official said it’s a “healthy debate” to have opposing opinions on whether a rate cut should happen. “Otherwise, if we’re always going to do the same, the joke is why won’t you have one person set policy and send the other FOMC members home,” he said.

He emphasized the importance of taking preemptive action. “If you worry about long and variable lags, which everyone always talks about, the whole point of that is to get ahead of it not wait for it to happen.”

Addressing concerns around inflation, Waller said tariffs are “a tax” and described the likely path of impact. “Suppliers will eat a third, firms will eat a third, consumers are gonna eat a third of that tariff,” he said, referring to the “rule of thirds.” He added that short-term inflation data should be monitored to assess the effect.

In remarks on Thursday in New York, Waller said most of the Trump administration’s planned tariffs would likely fade over the next year and wouldn’t be fully passed on to consumers. But in the Bloomberg interview, he warned about the risk of ongoing tariff rounds stoking inflation expectations.

“If there’s constantly a sequence of higher and higher tariffs, then you are going to get this rolling potential impact on prices,” he said. “As long as it’s a one-time tariff and that’s it, that’s a one-time price effect.”

U.S markets were set to open in the green on Friday morning. The SPDR S&P 500 ETF (SPY) edged 0.17% higher while the SPDR Dow Jones Industrial Average ETF (DIA) rose 0.14%. The Invesco QQQ Series 1 Trust (QQQ), which tracks the tech-heavy Nasdaq 100, climbed 0.13%. On Stockwits, retail sentiment around SPY was in ‘bullish’ territory in pre-market hours.

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