• Trump administration voices support for Fed Governor Waller's openness to rate cuts if economic data justifies easing.
  • Markets now price in an 87% chance of a September cut after soft jobs data, with dissent growing within the FOMC.
  • A vacant Fed seat gives Trump opportunity to shape monetary policy as political pressure mounts for lower rates.

Growing Momentum for Fed Easing

Federal Reserve Governor Christopher Waller's recent comments signaling willingness to cut interest rates based on economic forecasts have found favor with Trump administration officials, according to people familiar with the matter. The alignment comes as financial markets dramatically increase bets on monetary easing, with the probability of a September rate cut jumping to 87% following July's softer-than-expected jobs report.

Waller, a Trump appointee, joined Fed Governor Michelle Bowman in dissenting during last month's 9-2 vote to maintain rates. Their position gains significance as the resignation of Fed Governor Kugler creates an opportunity for the administration to appoint another potentially dovish policymaker. "There's clear daylight between the Fed's leadership and some of its members," noted one market strategist who requested anonymity to discuss central bank dynamics. "The vacancies could accelerate the pivot."

Economic Data Driving the Shift

Recent indicators show disinflation progressing faster than anticipated, with tariff impacts proving less severe than feared. The labor market, while still relatively strong, has shown enough softening to support arguments for preventive easing. Treasury yields have dipped accordingly, with the 10-year note falling 15 basis points since the jobs data as traders price in 41 basis points of cuts by year-end.

Mortgage rates are projected to follow suit, with analysts forecasting a gradual decline through 2028. "The case for cuts is building," said a senior bank economist, pointing to moderating inflation and global central bank actions. The European Central Bank and Bank of Canada have already begun easing cycles this year.

Political Calculus

The administration's public support for Waller's stance comes amid broader efforts to lower borrowing costs ahead of the election cycle. While Fed officials maintain their decisions are data-dependent, the combination of economic trends and potential personnel changes could create momentum for faster action. Market participants will scrutinize upcoming speeches by Fed leaders and the next inflation readings for confirmation of the emerging dovish tilt.