Federal Reserve Gov. Christopher Waller said Friday that economic data could justify lower interest rates as early as next month, abandoning concerns about peak tariff prices, noting concerns about recent labor market data.
exist CNBC TV Interview He said Friday that policymakers should have past short-term tariff impacts on inflation and focus on basic trends, saying it has been favorable in recent months.
“When inflation drops to the target, I lower these ‘good news’. We can actually lower interest rates. I’ve been saying that since around November 23,” Waller explained. “So I think we’re in this position. We can do that by July.”
In fact, inflation, unemployment and GDP growth operate at or near the Fed’s long-term target, but the ratio is 1.25-1.50 percentage points higher than the so-called neutral rate.
Still, he warned that the labor market is OK, but not as strong as 2022, pointing out that college graduates have a 25-year high unemployment rate and slower job creation.
“If you start to worry about downside risks in the labor market, move now and don’t wait,” CNBC interview said.
The comments were published two days after the Federal Open Market Committee (FOMC). Unanimous vote To position its main lending rate in the range of 4.25%-4.5%, it has been held since December. The commission reported that inflation and “stable” labor markets on June 18 were “a bit higher” Press release.
That aroused the anger of President Donald Trump, Called Powell Holding the “all and total idiot” of the Truth Society with stable interest rates and believes that the benchmark interest rate should be 2.5 percentage points below the current level.
While the Fed remains optimistic about the job market, other indicators indicate weakness.
The four-week moving average of the Ministry of Labor this week’s average of initial unemployment statements is the highest since August 2023 Report. Challenger’s May layoffs Report Recorded a 47% year-on-year increase in layoff intentions, the biggest plan for the service, retail and tech industries.
per month Poll The Federal Reserve Bank of Philadelphia tracked manufacturing commercial activity in the mid-Atlantic region and saw overall employment decline in June, with its employment index falling to its lowest reading since May 2020. The index holds its value for May, Lost Economists have slightly increased expectations for business activities.
National Federation of Independent Enterprises May Work Report 34% of small business owners found to report job vacancies they cannot fill, which have not changed since April and is the lowest since January 2021.
As the Fed’s expectations for expected inflation remain a strategy that has been waiting to see, economists are on how the Fed navigates the country’s economic uncertainty and how the latest data suggests a weaker job market. No economist contacted wealth See a tax cut in July.
“The FOMC’s forecast for continued low unemployment is wishful thinking,” Pantheon’s chief economist Samuel Tombs and U.S. senior economist Oliver Allen wrote in a June 20 report. “We believe the committee is once again overly optimistic about the outlook for unemployment.”
Pantheon’s Grave of Macroeconomics and Allen expects unemployment to rise from 4.2% to 4.6% in the third quarter, and 4.8% in the fourth quarter, surpassing the FOMC median 4.5%.
“With the impact of tariff shocks on the economy, the pressure on the labor market will increase,” Allen said in the data notes.
Consumers have not experienced the full impact of price increases due to tariffs, and The economist says This will happen in the summer.
Gregory Daco, chief economist at Ey-Parthenon, told wealth In the email.
DACO is expected to see a ripple of higher tariffs in the coming months, “impose inflationary pressures, weaken labor market conditions, compress profit margins, limit capital expenditures and curb household demand.”
He expects consumer spending and business investment to slow down sharply, and the climax of tariffs on the economy will slow GDP growth to near-speed, with output rising by 0.8% year-on-year by the fourth quarter.
Expectations of summer inflationary pressures will put economists in weighing when the Fed lowers rates, especially if job market data continue to focus on them.
He said wealth In the email. “Even so, with inflation risks looming, we don’t think the economy is enough to weaken to force the Fed to slow down in the coming months,” Pierce wrote.
Pierce added that unemployment claims against federal workers remain low as low as February. Recent court rulings have led economists to predict the time for federal workers to lay off later this year.
However, not everyone sees the recent initial claims data as the leader in the job market slowdown.
“What I’m seeing is a labor market facing excellent policy uncertainty and economic uncertainty.” wealth.
Data collection and analysis companies survey 10,000 people per week to determine whether they have lost their salary or income and collect data from the “standardized version of the household survey” used to calculate unemployment rates. Leer said from their numbers, he saw no evidence of a sharp weakening in the job market.
“Businesses are reluctant to open fire or fire workers too early when potentially keeping their payroll, selling more and earning higher incomes.”
As for the potential tariff impact on the labor market, Leer said it could take two years for small businesses working with his company to feel any higher input costs from import taxes.
“As time goes by, you’ll see a constant flow of higher prices because the company gradually reduces all its excess inventory and has to rely on imports to a greater extent,” he said.
