Fed’s Wallers is Preparing Markets for His Dissent, Stuart Paul

Federal Reserve Governor Christopher Waller hinted he would dissent if his colleagues vote to hold interest rates steady at their July meeting, making his case for a rate cut to support the labor market.

While it’s important not to dissent regularly, officials should take the step “if you make it very clear you think at this moment in time this is an important thing to do,” Waller said Friday in a Bloomberg TV interview.

“I dissented on the balance sheet slowdown earlier this year because I felt like that was not needed, and that’s kind of the situation we’re in now,” he said.

Bloomberg's Stuart Paul reports.

Waller restated the case he first revealed in a Thursday speech that the Fed should cut when policymakers gather later this month, given data suggesting the US labor market is “on the edge.”

“The private sector is not doing as well as everybody thinks it is,” he said. “Most of the employment growth we saw last month was in the public sector, and that means the private sector is not doing particularly well.”

A monthly employment report for June, published on July 3, showed a sharp slowdown in private-sector job growth and a deceleration in wage growth, even as the unemployment rate ticked lower. Inflation, meanwhile, remained muted in June, though goods prices rose in an early sign that tariff costs are being passed to consumers.

Waller said the price hit from tariffs is likely to be temporary and he sees no sign that inflation expectations are on the rise, which allows the Fed to move forward with rate cuts. Several other policymakers have expressed concern that tariffs could reignite inflation and would prefer waiting longer before lowering borrowing costs.

A gauge of the dollar fell 0.3% to touch a session low after Waller’s comments, and US Treasury yields edged down. Policymakers will gather July 29-30 in Washington, and investors expect them to hold rates steady. The odds of a rate cut at their next meeting in September are a little better than 50-50, according to futures.

Fed Chair

Waller has been among the names touted to succeed Jerome Powell at the head of the central bank when his term as chair expires in May. On Friday, Waller said President Donald Trump hadn’t reached out about the job.

“If he says, ‘Chris, I want you to do the job,’ I’ll say ‘yes’. But he’s not talking to me,” he said. “It’s a hypothetical that isn’t relevant.”

Waller added that it’s crucial for the president to choose a candidate that financial markets trust, because otherwise inflation expectations and interest rates will rise.

“Whoever they choose, you’re going to have to have somebody that has credibility with the markets,” Waller said.

If the next chair doesn’t have that credibility, “you’re going to see inflation expectations spike. You will not get lower interest rates. You will get higher interest rates,” he said.

“This is well-known. We’ve seen this everywhere around the world when this happens. And I know Scott Bessent knows this. So, this is not something that is lost on anybody,” Waller added, referring to Trump’s Treasury secretary.

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