Fed Board Member Says "Interest Rate Cuts Should Be Hastened If Reciprocal Tariffs Are Reinstated"

Christopher Waller Argues in Speech on the 14th
"Inflation Will Be Temporary... Impact on Output and Employment Will Be Significant"
Differences Within FOMC... Chair Powell Takes Cautious Approach

Christopher Waller, Member of the Board of Governors of the U.S. Federal Reserve (Fed). On the 14th (local time), he argued in a speech in St. Louis that interest rates should be cut if mutual tariffs are reinstated. Reuters Yonhap News

Christopher Waller, a member of the U.S. Federal Reserve (Fed) Board, argued on the 14th (local time) that if the Trump administration reverses the mutual tariffs currently suspended for 90 days, an early interest rate cut would be necessary due to the economic slowdown shock.

According to the British daily Financial Times (FT) and the U.S. Wall Street Journal (WSJ), Waller stated in a speech in St. Louis that if President Donald Trump reimposes tariffs, "the Fed will have no choice but to quickly implement an interest rate cut."

Waller predicted that if the mutual tariff policy is reinstated as announced by President Donald Trump on April 2, the impact on the U.S. economy would be significant. He forecasted that the U.S. unemployment rate would rise meaningfully from the current 4.2% to over 5% next year. As of March, the U.S. unemployment rate stood at 4.2%, slightly above the market expectation of 4.1%. On the other hand, he dismissed concerns by saying that although the U.S. inflation rate could rise close to 5%, it would be a temporary phenomenon.

Waller said, "The inflation effect of high tariffs is expected to be temporary, but the impact on output and employment (on the production side) could last longer," adding, "This could be an important factor in determining the monetary policy stance." He further stated, "If the economic slowdown is severe and accompanied by recession risks, I would support a faster and larger policy rate cut than currently planned."

However, FT noted that some Federal Open Market Committee (FOMC) members maintain a cautious stance, saying "let's judge based on the data." Opinions within the FOMC also differ regarding the duration of tariff-driven inflation. The dilemma of Jerome Powell, Fed Chair, who must consider both economic conditions and inflation, is deepening. The U.S. Washington Post (WP) editorial on the 10th pointed out that "the president's tariff policy has left the Fed with difficult decisions."

The Fed decided to maintain the benchmark interest rate at 4.25?4.50% following the March FOMC meeting. This was the second consecutive hold after the January 29 meeting, which was the first since the start of Donald Trump's second term administration.

The Trump administration is urging the Fed to cut interest rates. On the 5th, President Trump posted on his social media platform Truth Social, saying, "It is the perfect time for Jerome Powell, Fed Chair, to cut rates," adding, "He is always late, but now he can change his image." He also told Chair Powell to "stop the politics."