Fed’s Waller Suggests Possible Interest Rate Cuts in 2025 – Coincu

Federal Reserve Governor Christopher Waller indicated on May 22, 2025, a potential shift in interest rate policy depending on tariff reductions later this year.

Waller’s comments underscore proposed economic policy adjustments, aligning monetary strategies with trade developments.

Waller’s Perspective on Tariffs and Monetary Policy

Federal Reserve Governor Christopher Waller hinted at possible interest rate cuts in 2025 if tariffs decrease. Speaking to Fox Business, Waller mentioned, “If tariffs settle, the Fed could cut rates later this year,” aligning with previous statements. His optimism about tariff discussions reflects a shift from last month’s cautionary stance. Waller, contrasting earlier forecasts, now sees economic stabilization if tariffs reduce, suggesting potential interest rate adjustments in response. Waller stated, “If tariffs settle down, the Fed could be in position to cut in the later part of the year”, echoing his comments made to Fox Business. The US Dollar Index remained steady at 99.70 after his remarks, signifying that market reactions were muted despite his statements on potential policy changes.

Historical Tariff Implications on Inflation

Did you know? Fed Governor Waller’s insights on short-lived inflation align with historical views that tariffs result in one-time price spikes, not persistent inflation.

Waller has consistently maintained that tariffs cause temporary price changes, aligning with the textbook view of tariffs as one-time increases in prices. His stance on waiting for tariff resolution before adjusting rates reflects this view, countering past lessons when inflation proved sustained post-pandemic. Economists support this approach, citing historical trends where tariff-induced price changes were temporary. Some analysts, however, point out the impact of tariffs on FOMC’s economic objectives, referencing earlier periods of underestimated inflation. Market watch continues for further tariff negotiations, as they dictate potential economic shifts and monetary strategies.