Chris Waller, who is in favor of cutting interest rates promptly, mentioned he would be willing to take on the role of central bank head if President Donald Trump reached out to him. So far, there hasn’t been any communication from Trump regarding this.
Waller recounted a previous instance, back in 2019, when Trump asked if he would be willing to serve on the Federal Reserve board. He told Bloomberg TV, “If the president calls me and says, ‘I want you to serve,’ I’ll do that, but he hasn’t contacted me yet.”
Trump has been vocal in his criticism of Federal Reserve Chairman Jerome Powell, primarily focused on Powell’s hesitancy to lower rates amid worries that tariffs and trade policies could drive inflation higher.
Waller advocates for rate reductions in the upcoming Federal Reserve meeting at the end of July, expressing concerns about the slowing economy and private sector job growth. He believes tariffs will likely have a minimal effect on inflation.
Even though unemployment numbers appear favorable, Waller pointed out that the underlying data doesn’t reflect a robust labor market, suggesting that the Fed should consider reducing recruitment efforts.
It’s anticipated that central banks will keep benchmark interest rates steady in the 4.25%-4.50% range in upcoming meetings. Waller and another Trump appointee will be the only vice-chairman and members overseeing Michelle Bowman, with some colleagues hinting at a potential rate cut by September.
Waller maintains that his position on rates is “not political,” earning appreciation from economists for advocating for lower fees, although he’s under pressure regarding cost overruns of Federal Reserve renovations in Washington.
Despite Trump’s stance that rates should align with recession levels, Powell has consistently maintained his intention to stay in his role until his term ends in May.
Neil Dutta from Renaissance Macro Research noted that while Waller hasn’t discussed budget overruns or government finance changes explicitly, he tends to focus on the evolving risks in the economy. This suggests a persistent push against Powell’s decisions.
Casting Call
If appointed to succeed Powell, Waller, as a sitting federal governor, would immediately have voting power on policy decisions. Other potential candidates for the role include Treasury Secretary Scott Bessent and White House economic advisor Kevin Hassett.
Currently, Bessent, Hassett, or Kevin Warsh, a former governor and frequent Powell critic, haven’t participated in the central bank meetings since Governor Adriana Kugler’s term ended in February. Bessent mentioned that a formal process is already underway to find Powell’s successor, who was originally appointed by Trump in 2018 but quickly found himself at odds with the president over interest rates.
Waller, a former economics professor, noted that rate cuts in September, which are less than two weeks away, hold less significance for the economy. Still, his reluctance to lower interest rates has frustrated Trump since he took office in January.
It appeared that Trump was contemplating dismissing Powell recently, although the legality of such an action remains uncertain. However, this ongoing threat of action against the Fed chairman has created an economic environment conducive to rate reductions, even overshadowing discussions about maintaining the independence of the Fed.
Many believe that the Fed’s focus on managing inflation rather than funding government expenditures aligns with sound economic management principles and is essential for curbing inflation.
During a two-day meeting in Durban, South Africa, leaders from G20 countries, including U.S. Treasury representatives, emphasized the importance of central bank independence in a final statement.
The communique reiterated that central banks are committed to maintaining price stability while adapting policies based on data and highlighted that independence is crucial for achieving these outcomes.
Key Republicans on the Senate Finance Committee will play a role in confirming the new Fed chief or governor. Powell’s strong relationships in Congress have been highlighted as a significant aspect of his leadership.
Republican Senator Mike Rounds remarked that it benefits the economy for markets to recognize the Fed’s independence, stating, “I have a good relationship with the Chairman, and I will continue to maintain it while respecting his efforts to uphold that independence.”
