Fed Official Supports Rate Cuts Despite Trump Tariffs/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Federal Reserve Governor Christopher Waller reaffirmed his support for interest rate cuts in 2025, even if President-elect Trump’s proposed tariffs materialize. Speaking in Paris, Waller expressed confidence that inflation will ease toward the Fed’s 2% target, minimizing tariff impacts. His comments counter growing Wall Street expectations of limited rate reductions this year.
Fed Policy and Tariffs: Quick Looks
- Rate Cuts Expected: Waller supports further rate cuts in 2025, citing cooling inflation.
- Tariff Impact: Trump’s proposed tariffs are unlikely to significantly drive up inflation.
- Current Rates: The Fed’s key interest rate stands at 4.3%, down from 2023 highs of 5.3%.
- Policy Outlook: Fed officials project two cuts this year, with potential for adjustments.
- Market Expectations: Wall Street anticipates only one rate reduction in 2025.
Fed Governor Waller Supports Rate Cuts Despite Trump Tariffs
Deep Look
Federal Reserve Governor Christopher Waller, a key voice on monetary policy, expressed support Wednesday for additional interest rate cuts in 2025, despite elevated inflation and potential tariffs under the Trump administration. Speaking at the Organization for Economic Cooperation and Development in Paris, Waller dismissed fears that tariffs would significantly impact inflation.
Tariffs and Inflation
President-elect Donald Trump’s proposed tariffs have raised concerns about inflationary pressures, but Waller is optimistic they will have minimal impact.
“If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view,” Waller said.
Waller anticipates inflation will continue its gradual return to the Fed’s 2% target. While November’s inflation rate ticked up to 2.4%, Waller argued that outside the housing sector, which is difficult to measure accurately, prices are cooling.
Support for Rate Cuts
Waller’s stance contrasts with growing sentiment on Wall Street, where many investors expect the Fed to hold its rate steady at 4.3% for much of 2025. Financial markets currently price in just one rate cut for the year.
However, Waller reiterated his belief in the appropriateness of further reductions, aligning with the Fed’s December projections of two cuts in 2025. Policymakers at that meeting expressed a wide range of views, from no cuts to as many as five, depending on inflation trends.
“My bottom-line message is that I believe more cuts will be appropriate,” Waller said, emphasizing the need for flexibility as the Fed monitors inflationary progress.
Rate Cut Context
The Fed’s key interest rate peaked at 5.3% in 2023, a two-decade high, as the central bank aggressively tightened monetary policy to combat inflation. Subsequent rate reductions have eased borrowing costs, with the benchmark now at 4.3%.
The potential for further cuts depends on inflationary trends, economic growth, and external factors such as trade policies under the incoming administration.
Economic Uncertainty Ahead
Waller’s remarks underscore the complexity of the Fed’s policy decisions in 2025. While he remains optimistic about inflation’s trajectory, the economic impact of Trump’s tariffs remains a wild card.
As the year progresses, the Fed will need to balance its dual mandate of price stability and maximum employment with the uncertainties of a shifting political and economic landscape.
You must Register or Login to post a comment.