Fed's Waller: Rate cut should be on the table for July

Federal Reserve governor Christopher Waller told CNBC this morning that the central bank should cut rates "as early as July."

Why it matters: Waller is the most influential Fed official yet to advocate for cuts that financial markets largely expect to come in the fall, if not later.

• His comments come as Trump calls on the Fed to cut rates to help lower borrowing costs for the federal government, a new twist to his long-running pressure campaign.

What they're saying: "I think we're in a good spot right now for talking about bringing the rate down," Waller said.

• "We can start the process of bringing rates down and then if there's some big shock, due to maybe the Middle East conflict, we can pause," he added.

State of play: The Fed kept rates on hold on Wednesday for the fifth straight policy meeting, alongside projections showing the median official saw two rate cuts by the end of the year.

• The Fed is looking for any signs that Trump's tariffs are igniting inflation or weakening the labor market, outcomes that would require opposite policy responses.

What to watch: "We've been on pause for six months thinking that there was going to be a big tariff shock to inflation. We haven't seen it," Waller said.

• Waller pointed to some signs of labor market weakness, citing the high unemployment rate among recent college graduates: "If you're starting to worry about the downside risk to the labor market move now, don't wait."
• "I'm all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting, because we don't want to wait until the job market tanks before we start cutting the policy rate," he added.

The intrigue: Trump wrote on a social media yesterday that rates should be "2.5 Points lower, and save $BILLIONS on all of Biden's Short Term Debt."

• Waller said it was not the Fed's job to "provide cheap financing to the U.S. government."
• 'That is really the job of Congress and the Treasury, to make sure you have a fiscal situation that's sustainable. That will bring the deficits down and that will put downward pressure on interest rates all by itself," he said.
• He added that the Fed was "kind of a distant third in terms of having any impact" on long-term rates.