Trump Finds Unexpected Ally in Fed’s Christopher Waller as Rate Cut Debate Intensifies

Published: June 21, 2025 | Washington, D.C.

In a dramatic twist in the long-standing standoff between former President Donald Trump and the U.S. Federal Reserve, Fed Governor Christopher Waller has publicly signaled support for an interest rate cut, lending unexpected credibility to Trump’s calls for a more accommodative monetary policy. Waller’s remarks, delivered in a CNBC interview on Friday, have reignited political and financial tensions surrounding the Fed’s next policy move, as markets reevaluate the likelihood of a July rate cut. While Trump has long criticized Chair Jerome Powell’s resistance to rate reductions, Waller’s dovish shift could reshape both the political narrative and economic forecasts heading into the second half of 2025.

Waller’s Dovish Pivot Sparks Monetary Policy Turmoil

In a significant departure from previous messaging by the Federal Reserve Board, Governor Christopher Waller suggested that a July interest rate cut could be justified, citing waning inflationary pressures and stable economic fundamentals. “I think we’ve got room to bring it down, and then we can kind of see what happens with inflation,” Waller stated during his CNBC appearance, implying that the central bank should seize the opportunity to ease borrowing costs while macroeconomic indicators remain relatively favorable. His comments contradict Chair Powell’s more measured stance, which favors maintaining rates until stronger disinflation trends emerge. Waller also downplayed concerns that new tariffs or external shocks would reignite inflation, suggesting that the Fed’s primary risk now lies in over-tightening, not under-reacting.

Highlights

• Fed Governor Waller favors July rate cut, citing lower inflation concerns

• Disagrees with Powell’s cautious hold, calling for preemptive easing

• Downplays inflation risks from tariffs or global volatility

• Signals flexibility to pause cuts if inflation resurfaces

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Trump Seizes on Waller’s Comments to Renew Attacks on Powell

Trump quickly capitalized on Waller’s remarks, taking to Truth Social to commend the Fed governor for “finally showing courage” and calling Powell’s approach “deliberate sabotage of the American economy.” The former president, who has never hidden his disdain for Powell’s policies, described the central bank’s inaction as “killing American growth.” Vice President JD Vance echoed Trump’s sentiments, labeling the Fed’s refusal to lower rates as “monetary malpractice.” Trump’s attacks are not new, but Waller’s endorsement of rate cuts lends the former president’s criticism new weight. This shift could prove politically explosive as monetary policy becomes an increasingly partisan issue in the run-up to the 2026 midterms.

Highlights

• Trump praised Waller, criticizing Powell for “deliberate sabotage”

• JD Vance calls current Fed policy “monetary malpractice”

• Waller’s dovish stance bolsters Trump’s economic argument

• Rate policy becomes central to political messaging ahead of 2026 elections

Market Reaction: Gains Tempered as Uncertainty Prevails

Equity markets reacted swiftly—but briefly—to Waller’s surprise dovish comments. Major indices saw an initial uptick, with the Dow rising over 140 points before paring back gains. The S&P 500 and Nasdaq Composite showed mixed movements, reflecting lingering doubts over whether the Fed will act in July. According to CME FedWatch data, Fed funds futures still show an 83% probability that rates will remain unchanged next month, suggesting traders are not fully convinced that Waller’s views reflect a broader shift within the Federal Open Market Committee (FOMC). The market’s tempered response reveals investor wariness about jumping the gun amid mixed signals from Fed leadership and ongoing geopolitical uncertainty.

Highlights

• Dow jumped 147 points before retreating, reflecting cautious optimism

• S&P 500 posted minor gains, while Nasdaq declined 0.28%

• Fed funds futures still favor no cut in July, despite Waller’s stance

• Investor sentiment remains divided amid geopolitical volatility

Powell Holds Ground as Central Bank Independence Faces Pressure

Chair Jerome Powell has maintained a steady course, signaling no immediate need for rate adjustments unless inflation shows sustained movement toward the 2% target. Speaking at the Fed’s latest meeting, Powell reiterated the need for “clarity and consistency” in policy, resisting political pressures despite intensifying calls for action. “We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments,” he stated, underlining the Fed’s data-driven approach. However, Waller’s divergence raises internal questions about consensus within the FOMC, potentially complicating the Fed’s ability to present a unified outlook in upcoming meetings.

Highlights

• Powell stands firm on holding rates, prioritizing inflation trends

• Reaffirms Fed’s independence, resisting political pressure

• Fed remains data-driven, with no commitment to July cut

• Internal divergence within FOMC becomes more visible

Speculation Mounts Over Powell’s Future and Fed Leadership Changes

Trump’s renewed hostility toward Jerome Powell has reignited speculation about potential changes in Fed leadership should political dynamics shift after the 2026 elections. Betting markets now show increasing odds that Powell will not be reappointed if Trump or a like-minded successor returns to the White House. Among the names floated as possible replacements are former Fed Governor Kevin Warsh, ex-Trump advisor Judy Shelton, and Treasury Secretary Scott Bessent. Each brings a more hawkish, or at least politically aligned, perspective on monetary flexibility. These developments not only reflect political friction but also underscore how monetary policy has become a proxy battleground for broader economic ideology.

Highlights

• Trump may replace Powell if political conditions align post-2026

• Kevin Warsh, Judy Shelton, Scott Bessent seen as top contenders

• Monetary policy increasingly politicized, challenging Fed’s neutrality

• Leadership speculation adds another layer of market uncertainty

Broader Implications for Global Trade and Inflation Outlook

As the debate over rate cuts continues, external economic factors—from global commodity prices to trade tensions—remain critical in shaping Fed policy. Waller’s assertion that tariffs may not significantly stoke inflation contradicts long-held concerns among economists. Nonetheless, global oil price volatility and supply chain disruptions from Middle East tensions could change the inflation equation rapidly. Should Powell’s cautious stance prove prescient, a premature rate cut might risk a resurgence in inflationary momentum. For now, the Fed finds itself walking a tightrope: balancing growth support amid subdued inflation while staying alert to any global shocks that could reignite price instability.

Highlights

• Waller downplays inflation impact from tariffs, diverging from consensus

• Global tensions, especially in energy markets, may pressure inflation

• Fed must balance domestic goals with international economic volatility

• Premature easing could backfire if global shocks trigger new inflation