Fed’s Christopher Waller Supports Rate Cuts Despite Trump Tariff Concerns

A senior policymaker at the U.S. Federal Reserve signaled on Wednesday that he remains in favor of cutting interest rates this year, even as inflation stays elevated and the incoming Trump administration prepares to impose broader tariffs.

Christopher Waller, a key member of the Fed’s Board of Governors, expressed confidence that inflation will move closer to the central bank’s 2 percent target in the coming months and downplayed the potential impact of tariffs on the broader economy.

Speaking in Paris at the Organization for Economic Cooperation and Development (OECD), Waller reiterated his belief that further rate cuts would be appropriate, despite the uncertain economic environment.

Why It Matters

Christopher Waller’s comments come amid growing concerns over the potential economic fallout from a fresh wave of tariffs under the incoming Trump administration, which has unsettled financial markets in recent months.

Will Interest Rates Be Cut This Year?

Investors are anxious that tariffs could stoke inflation by raising the costs of imported goods, particularly as businesses pass on those price hikes to consumers.

However, Waller appeared more optimistic than many on Wall Street, where fears of stubborn inflation have increased in recent weeks.

Despite a slight uptick in inflation to 2.4 percent in November, Waller contends that inflationary pressures are cooling overall.

Waller’s comments stand in contrast to growing market expectations that the Fed will hold off on further rate cuts in the near term, as inflation remains above the target range.

What to Know

After several rate reductions in 2024, the central bank’s benchmark rate now stands at 4.3 percent, down from a two-decade high of 5.3 percent.

Market projections, based on futures trading, suggest that only one rate cut is likely in 2025.

While Waller did not specify how many rate cuts he supports, he referenced the Fed’s December projections, which showed a consensus for two rate reductions this year.

However, he emphasized that the final decision would depend on how inflation trends and whether further economic risks, including tariffs, materialize.

Federal Reserve Chair Jerome Powell has previously cautioned that the impact of tariffs on inflation and monetary policy is difficult to predict until the specifics of President-elect Donald Trump’s trade policies become clear.

What Impact Will Donald Trump’s Tariffs Have on Inflation?

In December, Powell acknowledged that some members of the Fed are factoring in the potential effects of the new administration’s economic policies, including the possibility of widespread tariffs.

In a Q&A session on Wednesday, Waller also touched on the impact of rising long-term interest rates, which he said have been partly driven by concerns over the federal budget deficit.

With borrowing costs climbing, particularly for mortgages, Waller warned that markets may begin to demand higher premiums for risk, potentially putting further strain on both consumers and businesses.

What People Are Saying

Christopher Waller, a key member of the Fed’s Board of Governors, said: “My bottom-line message is that I believe more cuts will be appropriate. If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view.”

He said: “I believe that inflation will continue to make progress toward our 2 percent goal over the medium term and that further reductions will be appropriate.”

What Happens Next

Later on Wednesday, the Fed will release the minutes from its December meeting, which are expected to provide more insights into the central bank’s deliberations on inflation, interest rates, and the potential economic consequences of the incoming administration’s trade policies.

This article contains additional reporting from The Associated Press.