In brief
- Federal Reserve Governor Christopher Waller argued that the Fed should cut rates in July before the labor market “tanks.”
- The Fed held interest rates steady on Wednesday for a fourth consecutive month.
- Fed Chair Powell noted that economic uncertainty, amid Trump’s trade war, remains elevated, but that the haze has “diminished.”
The price of Bitcoin was little changed on Friday as U.S. Federal Reserve Governor Christopher Waller argued that the U.S. central bank could start lowering interest rates as early as July.
Bitcoin was recently changing hands at $104,300, flat over the past day and down 0.6% since Israel and Iran began exchanging missile attacks a week ago, according to crypto data provider CoinGecko. Ethereum was flat over the past 24 hours to trade just around $2,500, while Solana ticked up slightly.
With inflation running cooler-than-expected in recent months, Waller argued that the central bank has a green light to begin lowering borrowing costs, despite U.S. Donald Trump’s tariffs, which economists fear could lead to slower economic growth and higher costs for consumers—and Middle East tensions that could fuel higher energy prices.
“I think we’re in the position that we could do this as early as July,” he said on CNBC’s “Squawk Box. “That would be my view, whether the committee would go along with it or not.”
Waller’s comments follow the Fed’s decision to hold rates steady on Wednesday for a fourth meeting in a row, adhering to a wait-and-see approach adopted under Trump’s term. During the conference, Fed Chair Jerome Powell noted that economic uncertainty for the U.S. remains elevated, but has “diminished,” amid twists and turns in the president’s trade policy.
Most policymakers at the Fed are penciling in two quarter-percentage-point rate cuts this year, economic projections released on Wednesday showed. At the same time, a greater number of governors estimated that the central bank would deliver no rate cuts this year, as their median estimates pointed to slightly higher inflation and slower economic growth.
Waller said that the bank should start cutting rates soon “because we don’t want to wait until the job market tanks before we start cutting the policy rate.”
Many economists feel the Fed is in a tough place, where any action will negatively affect progress on its dual mandate: cut rates too soon and inflation could take off again, hold rates elevated for too long and that could hamstring its goal of facilitating full U.S. employment.
“The Fed is caught in a holding pattern due to tariff uncertainty and is waiting for more information,” Grayscale’s Head of Research Zach Pandl told Decrypt. “Taking a step back, the Fed’s projections still point to easing ahead, despite higher expected inflation later this year.”
Fed futures traders penciled in a 14% chance on Friday that the bank would cut rates in July, a decrease from 28% a month ago, according to CME FedWatch. The central bank has held its benchmark rate at a target range of 4.25% to 4.5% since December.
Bitcoin boomed as the Fed lowered interest rates by a full percentage point last year. Although the central bank’s easing came amid the reelection of America’s first “crypto president,” lower interest rates tend to benefit risk assets like stocks and crypto by freeing up liquidity.
The president himself has clashed with the Fed’s reluctance to ease borrowing costs amid his trade war, while also pursuing an immigration crackdown. Prior to the Fed’s decision on Wednesday, the president called Powell “stupid.”
Edited by James Rubin
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