A Federal Reserve (Fed) official in the United States expressed the view that President Donald Trump's tariff policy would not have a significant impact on inflation.
On the 18th (local time), according to Bloomberg News and others, Fed Governor Christopher Waller said at an event held in Australia that "tariffs will moderately raise prices and will not be persistent."
While acknowledging the possibility that tariffs could have a greater impact on prices than expected, he added, "Other policies under discussion could bring positive supply effects and exert downward pressure on inflation."
Some economists have suggested that policies such as the Trump administration's tariffs and the deportation of illegal immigrants could affect inflation. The Wall Street Journal (WSJ) interpreted Waller's remarks as meaning that the Fed should not hesitate to cut interest rates.
Waller said, "The indicators currently do not support a policy rate cut," but added, "If 2025 proceeds similarly to 2024, a rate cut will be appropriate at some point this year."
Last month, the U.S. Consumer Price Index (CPI) rose 3% year-over-year, exceeding both the previous month's increase (2.9%) and forecasts (2.9%). The Fed has cut its benchmark interest rate three times consecutively since September last year and held rates steady last month at 4.25-4.5%.
Waller emphasized, "We must always keep in mind that uncertainty about economic policy exists, and even when facing significant uncertainty about economic conditions, we must act based on incoming data." He referenced the Fed's rate hikes immediately after Russia's invasion of Ukraine in 2022 and during a series of bank failures in 2023. This indicates that despite economic uncertainty, the Fed will lower rates if necessary.
On the same day, Fed Governor Michelle Bowman said more data on inflation slowing is needed before cutting rates further. She also forecasted that inflation will continue to slow this year but may take longer than expected. She stated, "Especially with a strong labor market, the risks to price stability continue to grow."
Governors Waller and Bowman were nominated to the Fed during President Trump's first term.
President Trump has advocated for significant interest rate cuts and publicly pressured the Fed to lower rates during his first term as well.
According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on the day reflected a 97.5% probability that the Fed will hold the benchmark rate steady in March and a 49.8% chance that rates will remain unchanged throughout the first half of the year.
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