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Waller: Central Bank Should Cut Rates 07/18 05:58
A top Federal Reserve official said late Thursday that the central bank
should cut its key interest rate later this month, carving out a different view
than that of Chair Jerome Powell, who has been harshly criticized by the White
House for delaying rate cuts.
WASHINGTON (AP) -- A top Federal Reserve official said late Thursday that
the central bank should cut its key interest rate later this month, carving out
a different view than that of Chair Jerome Powell, who has been harshly
criticized by the White House for delaying rate cuts.
Christopher Waller, a member of the Fed's governing board, said in a speech
in New York City that the economy is showing signs of weakening, with consumer
spending slowing and job gains cooling. The Fed should reduce borrowing costs
to shore up spending and growth before the job market weakens further, Waller
said.
"The economy is still growing, but its momentum has slowed significantly,"
he said, adding that the slowdown threatens the Fed's goal of maximum
employment.
At the same time, President Donald Trump's sweeping tariffs are likely to
only lift inflation temporarily and aren't a reason to postpone rate cuts,
Waller said.
"Tariffs have boosted, and will continue to boost, inflation a bit above the
(Fed's) 2% objective this year," Waller said, but policymakers should "look
through tariff effects and focus on underlying inflation," which he said is
nearing the 2% goal.
Waller has been mentioned as a potential replacement for Powell when the
current chair's term expires in May 2026, or perhaps earlier if Trump takes the
unprecedented step of firing Powell. Trump has threatened to fire Powell this
year but on Wednesday said it was "highly unlikely" he would take such a step.
For his part, Powell has said the Fed wants to see the impact of the duties
on prices and the economy before making any moves.
Waller, a Trump appointee, has previously said that he would support a rate
cut in July. Michelle Bowman, also a Trump appointee, has also spoken in favor
of a cut.
Minutes to the Fed's June 17-18 meeting said that only "a couple" of the 19
members of the central bank's interest-rate setting committee supported a cut
in July.
Other participants -- the minutes didn't say how many -- said that the Fed
should keep rates unchanged this year, since inflation remains above 2%.
Consumer prices rose 2.7% in June from a year ago, the fastest pace in four
months.
Other potential replacements for Powell have also publicly expressed support
for cutting rates soon, including Kevin Warsh, a former member of the Fed's
board who stepped down in 2011. Warsh, currently a fellow at the Hoover
Institution, said on Fox News' "Sunday Morning Futures" earlier this week that
he supported rate cuts.
"The president's right to be frustrated with Jay Powell and the Federal
Reserve," Warsh said.
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