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The American Federal Reserve must start reducing interest rates as soon as next month, a senior official has said, underlining the deepening of the schism at the central bank to lower the loan costs this year.
Fed-Gouverneur Christopher Waller, a top candidate to succeed Chairman Jay Powell, said that economic data supported the reduction of rates in the short term, despite the threat of higher inflation of President Donald Trump’s rates.
“I think we are in that position and that we could already do this in July,” said Waller, who was put in the Fed policy panel in 2020 after he was nominated by Trump during his first term, to CNBC on Friday.
“You would like to start slowly and bring them down to ensure that there are no big surprises. But start the process. That is the most important thing.”
FED policy makers are divided on whether or not to lower the rates this year for fear that tarift curling can cause a new increase in inflation and at the same time cooling economic growth.
The Federal Open Market Committee chose this week to keep rates stable in a range of 4.25-4.5 percent for the fourth consecutive meeting, even if Trump stacks the pressure on Powell, whose period as Fed Chair ends in May 2026 to cut them.
Ten members of the committee predict two or more cuts at the quarter point by the end of the year, while seven did not predict. Two expect only one cut.
Powell said Wednesday: “We are well positioned to wait more about the likely course of the economy before we consider changes to our policy position” and warned: “It is our job to ensure that a one -off increase in inflation does not become an inflation problem.”
But Waller said that a serious tariff price effect still had to come out and be a one -off effect if that did.
“We paused for six months to think that there would be a large tariff shock for inflation. We didn’t see it,” he said. “We have to base policy … on the data.”
“I don’t think we have to wait much longer, because even if the rates arrive later, the effects are still the same, it should be a one-off level effect and not cause persistent inflation.”
Trump took Powell after this week’s FOMC decision and said that the rates should be 2.5 percentage points lower to reduce the costs of interest payments on the US government debt.
“” Too late “Jerome Powell costs our country hundreds of billions of dollars. He is really one of the stupidest and most destructive people in the government, and the Fed Board is complicit,” the president is written On his truth social platform on Thursday.
When asked about the president’s comments, Waller insisted that it is “not our job” for the Fed to tackle the costs of financing the government debt.
“Our mandate of the congress tells us that we have to worry about unemployment and price stability, and that is what we do. It does not tell us to offer cheap financing to the US government,” he said.
“That is really the task of the congress and the treasury to ensure that you have a tax situation that is sustainable that will bring down the shortages and that in itself will exert downward pressure on the interest rates.“
