Fed Governor Waller supports rate cuts despite Trump tariff concerns

Federal Reserve governor Chris Waller reiterated his support for rate cuts this year, even though inflation is a worry. Despite new tariff threats from President Trump’s administration, Waller said on Wednesday that he was optimistic the inflation would continue to fall.

According to ABC News, Waller said in a Paris speech, “I believe that inflation will continue to make progress toward our 2% goal over the medium term and that further reductions will be appropriate.”

Waller acknowledged that tariffs could put pressure on inflation, but mentioned that the economic impact is unknown. He added: “If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view of appropriate monetary policy.”

Tensions brewing between Trump and the Fed

Trump and the Fed are on a collision course with each other, as the central bank may be reluctant to cut rates if inflation remains elevated. Trump’s tariff-heavy policies could also hamstring the Fed, economists believe. 

On Tuesday, Trump ramped up criticism of the Fed during a press conference in Florida, calling interest rates “far too high” and blaming the previous administration for economic challenges.

Mexico has vowed retaliation and Trump has proposed tariffs of 25% on Mexico and Canada and 10% on China. Earlier this week, mixed signals about the scope of the tariffs fueled market turbulence, after a Washington Post report suggested the tariffs would be limited to critical imports. Trump later denied scaling back his tariff plans, calling the report “wrong” on social media.

Fed seems cautious on rate cuts

Waller, however, said it was too early to adjust forecasts based on concrete policy actions. But he did not specify how many rate cuts could occur in 2025 and reiterated that more cuts are appropriate.

“The pace of those cuts will depend on how much progress we make on inflation while keeping the labor market from weakening,” Waller said. The U.S. economy is strong and he doesn’t see a significant weakening of the labor market, he added.

“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” Waller further added.

Other Fed officials have been more cautious. The resilient job market and inflation mean the Fed should lower rates gradually, Governor Lisa Cook said on Monday. San Francisco Fed President Mary Daly and Governor Adriana Kugler both stressed the fact that the Fed has to do more work to reduce inflation without weakening the job market.

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