Fed’s Waller says rate cuts remain possible later in 2025 | Forexlive

Speech by Governor Waller on the economic outlook, full text here:

• ‘Good news’ rate cuts remain possible later this year
• Rate cut view rests on easing inflation, tariffs on lower end of range
• Strong economy through April gives Fed time to see how trade shakes out
• Tariffs likely to create one-time price increase Fed can look through
• Considerable uncertainty still surrounds trade policy outlook
• Sees downside risk to economy, job market, upside risk to inflation
• Tariffs to be main driver of inflation this year
• Tariffs will drive up unemployment which will likely linger
• Tariff inflation impact likely greatest in second half of 2025
• 01 Jun 2025 08:00:00 PM – Fed’s Waller says he is most attentive to market and forecaster views on inflation
• Doesn’t see real world issues with expected path of inflation
• Some of modest sized tariff regime will not be passed along

Waller continues to downplay the long-term impact of tariffs on inflation, maintaining that price pressures from tariffs will likely be temporary and that inflation expectations remain well anchored.

On some surveys suggesting consumers expect higher inflation, Waller argues that the current labour market doesn’t give workers enough bargaining power to push for and win higher wages:

• workers don’t have much leverage to ask for raises
• workers are probably more worried about keeping their jobs than seeking pay hikes right now

Given this, Waller still supports the idea of cutting interest rates later this year, even if the job market holds steady, choosing to “look through” any inflation caused by tariffs.

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