While President-elect Donald Trump's tough talk on tariffs has
In public remarks Wednesday morning, Fed Gov. Christopher Waller said Trump's tariffs could create upward pressure on prices, but he expects that to result in, effectively, a one-time price hike rather than sustained inflationary pressure over time.
"If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view of appropriate monetary policy," Waller said. "Of course, we need to see what policies are enacted before we can seriously consider their effects."
Waller noted that much remains to be seen regarding the incoming trade regime, including what countries and industries are hit with tariffs, as well as the scope and duration of those penalties. Still, based on private sector analysis, Waller said he does not expect the policies to be "draconian" nor does he anticipate continued application of new tariffs.
"If you did them all at once, it would be a one-time jump in the price level and inflation and then it would go away," he said.
Yet, Waller acknowledged that given the recent bout of inflation that arose during the COVID-19 pandemic — which the Fed initially
"After what we just went through, people are very sensitive to inflation," Waller said. "We might have been able to look through it a lot more easily a few years ago than they would now."
In the near term, Waller said there is no need to adjust the
He also acknowledged that the economy's progress toward the Fed's target of 2% annualized inflation has stalled in recent months, but said he still believes prices are moving in the right direction and the Fed's monetary policy remains restrictive. In light of this he said he expects
"If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025," he said. "The pace of those cuts will depend on how much progress we make on inflation, while keeping the labor market from weakening."
Waller said there were an array of views on the Federal Open Market Committee during its
"That's a huge range of potential outcomes," he said.
Waller delivered a prepared speech and fielded audience questions during an event hosted by the Organization for Economic Cooperation and Development, or OECD, an intergovernmental organization made up of 38 of the world's largest economies.
During his remarks he discussed various economic headwinds impacting the OECD nations and complicating monetary policymaking. He highlighted supply chain disruptions, loss of manufacturing capacity, aging populations, increases in fiscal spending and the "rethink of globalization" as factors clouding the outlook for central bankers around the globe.
On the topic of globalization, Waller said this was not the end of cross-border economic integration, but rather a moment for world leaders to rethink their approaches to trade and the implications for their constituents.
"There will be more thought and consideration among our leaders for how globalization affects the people we serve, with a more careful weighing of both the potential costs of closer integration and the potential benefits," Waller said. "As these decisions by governments are made, central bankers will need to be prepared to respond appropriately in setting monetary policy and promoting financial stability."
Despite the various economic headwinds, Waller said the Fed and its counterparts are up to the task of keeping inflation in check. But, he said, doing so will require diligence and a commitment to core duties and "resisting the temptation to go beyond them."
"We must closely monitor economic and financial conditions and look in every direction, and down the road, for emerging risks," he said. "In keeping to our mandates, we concede that seeing all these risks clearly is hard, so we need to remain focused."
