Fed Governor Waller Sees Path to Rate Cuts Despite Trump Tariff Pressures

In a Monday address in Seoul, South Korea, Fed Governor Christopher Waller maintained an optimistic stance on potential interest rate reductions later this year, even as Trump administration tariffs threaten to increase prices. Waller’s key message: the Fed should “look through” temporary tariff-driven inflation when setting policy rates.

The governor acknowledged that tariffs will likely create economic headwinds—reducing spending, production, and employment while pushing prices higher. However, he expects these effects to be one-time increases concentrated in the second half of 2025. With the federal funds rate currently between 4.25% and 4.5%, Waller sees room for “good news” rate cuts if underlying inflation continues improving and employment stays strong.

His position contrasts with more cautious Fed colleagues who prefer a wait-and-see approach amid trade policy uncertainty. Waller’s confidence stems partly from the economy’s current resilience and the likelihood that modest tariffs (around 10%) won’t be fully passed to consumers.