Federal Reserve Governor Waller stated that if the labor market comes under pressure, he will support interest rate cuts to address tariff impacts
Federal Reserve Governor Waller stated that if the Trump administration reinstates high tariffs, it could lead to corporate layoffs and an increase in the unemployment rate, and he would support interest rate cuts to protect the labor market. He believes that the impact of high tariffs will not cause significant shocks to the overall economy in the short term, but prolonged tariffs could lead to a rapid rise in the unemployment rate. Waller reiterated that the inflationary pressures brought by tariffs are temporary and emphasized the importance of stabilizing inflation and public confidence. The market is focused on the impact of Trump's trade policy on future monetary policy
According to the Zhitong Finance APP, Federal Reserve Governor Christopher Waller stated in an interview on Thursday that if the Trump administration reinstates high tariffs, companies may begin to lay off more workers, and he would support interest rate cuts to protect the labor market.
"If particularly high tariffs are reinstated, then you might see an increase in layoffs, and the unemployment rate may also rise, which wouldn't surprise me," Waller said in the interview. "If I see a significant decline in the labor market, then as part of the Federal Reserve's dual mandate regarding employment, I believe we have a responsibility to take action."
Waller noted that he does not believe the impact of tariffs will have a significant shock on the overall economy before July, but if high tariffs persist for a long time, the unemployment rate may rise rapidly thereafter.
Nevertheless, Waller reiterated that he believes the inflationary pressures brought about by Trump's tariff policies will be temporary, a view that contrasts with some other Federal Reserve officials who are concerned that tariffs imposed on multiple U.S. trading partners could lead to more persistent inflation.
In the context of high uncertainty in current economic policy, Federal Reserve Chairman Jerome Powell and other decision-makers have repeatedly emphasized that stabilizing inflation and public confidence in price expectations remain crucial when addressing the uncertainties brought about by tariffs and other economic policies of Trump.
So far, the Federal Reserve has not adjusted interest rates through 2025, and Powell has repeatedly stated that there is no urgency to make policy changes at this time. Waller's remarks highlight that if unemployment data worsens, interest rate cuts may become one of the policy options.
The market is closely monitoring potential implications for trade policy direction in Trump's campaign rhetoric while also assessing its possible impact on the future path of monetary policy
