Rate Cuts Ahead? Fed Voices Weigh In as Stocks Hit Record High

Federal Reserve Governor Christopher Waller says policymakers should cut interest rates now to support a labor market that is showing signs of weakness. Separately Federal Reserve Bank of San Francisco President Mary Daly Told Bloomberg she still thinks it's reasonable for policymakers to plan on two interest-rate cuts this year, emphasizing that the central bank should not wait too long before moving. So could the Fed cut rates soon?

Bloomberg MLIV Executive Editor Mark Cudmore joins Caroline Hepker and Valerie Tytel on Bloomberg radio to discuss as a new S&P 500 high indicates that a record-extending global stock rally may have further to run with strong economic data easing concerns about the health of the US economy.

Federal Reserve Governor Christopher Waller said worries about hiring in the private sector have driven his call for the central bank to cut rates this month.

He stopped just short of saying he would dissent if his colleagues don’t lower rates at the Fed’s July 29-30 meeting.

“The private sector is not doing as well as everybody thinks it is,” Waller said Friday in an interview on Bloomberg Television. “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.

A gauge of the dollar fell 0.3% to touch a session low and US Treasury yields edged down after the comments.

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 choose a candidate that financial markets trust, 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, he said, “you’re going to see inflation expectations spike, but you will not get lower interest rates. You will get higher interest rates. This is well known. We’ve seen this everywhere around the world when this happens.”

His comments follow a speech he delivered Thursday in New York in which he argued that with inflation risks limited, the US central bank ought to lower borrowing costs before the labor market begins to deteriorate.

Policymakers are expected hold rates steady later this month and then cut in September.

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