fed's waller eyes july rate cut, diverging from powell's caution

2025-06-20 general

Washington, Friday, 20 June 2025.
federal reserve governor christopher waller signaled support for cutting interest rates as early as july. this contrasts with chairman powell’s hesitancy. waller believes inflation is under control, despite tariff concerns. his comments boosted long-term bond prices, pushing the 10-year treasury yield down to 4.37%. this move could reduce borrowing costs and spur investment in the semiconductor sector. companies like nvidia, asml, and tsmc could benefit. some analysts speculate waller’s stance could improve his chances of becoming the next fed chair.

market reaction and analysis

Following Waller’s comments, major indexes opened higher [5]. The dow jones industrial average rose by 0.54%, a 0.545 increase of 229.81 points, reaching 42,401.47 [5]. the nasdaq composite index saw a 0.70% gain, climbing 137.49 points to 19,683.76 [5]. the s&p 500 index increased by 0.49%, adding 29.18 points to reach 6,010.05 [5]. the philly semiconductor index experienced a 0.78% rise, gaining 40.35 points to 5,291.88 [5]. these initial market reactions suggest investor optimism regarding potential rate cuts [5].

interest rate outlook

Despite waller’s suggestion of a july rate cut, the cme group’s fedwatch tool indicates that the futures market anticipates the next rate cut in september [5]. the federal open market committee (fomc) previously voted to maintain the benchmark interest rate in a range of 4.25% to 4.5% [5]. waller, nominated by president trump, has advocated for lower rates to alleviate the borrowing costs associated with the $36 trillion national debt [6]. he argues against waiting for the labor market to weaken before implementing rate cuts [6].

geopolitical factors at play

broader market sentiment was also influenced by geopolitical developments [5]. president trump’s decision to temporarily suspend military action against iran eased tensions in the middle east, contributing to the positive market open [5]. however, jeff buchbinder, chief equity strategist at lpl financial, cautioned that key questions regarding the impact of geopolitical shocks, particularly concerning iran’s energy infrastructure and nuclear capabilities, remain unanswered [5]. iranian foreign minister araghchi met with european counterparts to discuss the iran-israel conflict and iran’s nuclear program [7].

analyst perspectives

ubs group’s wealth management division’s brian buetel noted the various challenges facing the market, including geopolitical tensions, tariff uncertainties, and questions surrounding the fed’s next moves [5]. despite these risks, buetel maintains a positive outlook, viewing the stock market as a forward-looking indicator of economic growth [5]. waller’s perspective aligns with a proactive approach to monetary policy, aiming to prevent economic downturns rather than reacting to crises [6]. his stance is seen by some as positioning him favorably for consideration as the next fed chair [1].

Bronnen

federal reserve interest rates