A leading policy maker in US Federal Reserve said Wednesday he still favors the reduction interest rate this year, despite high inflation and the prospect of widespread tariffs under the new Trump administration.
Christopher Waller, an influential member of the Fed’s board of governors, said he expects inflation to move closer to the Fed’s 2% target in the coming months. And in some of the first comments from a Fed official specifically on tariffs, he said higher import duties probably won’t raise inflation this year.
“My basic message is that I think more reductions will be appropriate,” Waller said in Paris at the Organization for Economic Co-operation and Development.
“If, as I expected, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view,” Waller added.
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His remarks are notable because the impact of tariffs is a key factor for the economy this year. Waller also suggested he was more optimistic about inflation than many Wall Street investors, who increasingly expect the Fed to hold its benchmark rate this year as high prices continue to rise. persist.
“I believe inflation will continue to advance toward our 2% target over the medium term and that further (rate) cuts will be appropriate,” Waller said. While inflation has been persistent in recent months — it reached 2.4% in November, according to the Fed’s preferred measure — Waller argued that outside of housing, which is difficult to measure, prices are cooling .
Waller’s remarks run counter to growing expectations on Wall Street that the Fed may not cut its benchmark rate much, if at all, this year. It currently stands at around 4.3%, after several reductions last year, from a two-decade high of 5.3%. Financial markets expect just one rate cut in 2025, according to futures prices tracked by CME Fedwatch.
Waller did not say how many cuts he specifically supported. Instead, he said Fed officials were planning two cuts this year, as a group, in December. But he also noted that policymakers supported a wide range of outcomes, from no reductions to five. The number of cuts will depend on progress in reducing inflation, he added.
© 2025 The Canadian Press