Fed’s Waller sees Trump tariffs having limited impact on inflation

Federal Reserve Governor Christopher Waller said on Tuesday that he expects trade tariffs under President Donald Trump as having only a limited impact on inflation, and that the central bank should not stall in adjusting policy.

Speaking at an event in Australia, Waller said his “baseline” view was that “any imposition of tariffs will only modestly increase prices and in a non-persistent manner.”

He recommended that the Fed look through the effects of Trump’s trade policies when adjusting interest rates.

“I concede that the effects of tariffs could be larger than I anticipate, depending on how large they are and how they are implemented. But we also need to remember that it is possible that other policies under discussion could have positive supply effects and put downward pressure on inflation,” Waller said.

His comments come just weeks after the Fed kept interest rates steady, while warning over increased uncertainty in the face of Trump’s trade tariffs. The U.S. President had last week imposed 25% duties on steel and aluminum imports, and also flagged plans for reciprocal tariffs on major trading partners.

The Fed governor said that a pause in the Fed’s interest rate cuts was appropriate, citing a strong labor market and signs of sticky inflation. The latter in particular necessitated the need for policy remaining restrictive, Waller said.

He noted that last week’s hotter-than-expected consumer and producer inflation readings were “mildly disappointing,” although they still reflected some progress against inflation over the past 12 months.

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Still, Waller said that rate cuts would be appropriate eventually, especially if “2025 plays out like 2024.”

The Fed cut rates by a total of 1% in 2024, citing progress in bringing down inflation. But the central bank has now forecast an extended pause on future rate cuts, as inflation proved to be stickier than anticipated.