Federal Reserve officials expressed a cautious approach regarding monetary policy adjustments while they await further data on the economic impacts of trade tariffs imposed by the Trump administration. In a recent interview, Fed Governor Christopher Waller suggested that clarity on these effects may not emerge until later this summer, indicating there is no immediate need for a policy change.
Waller emphasized that significant data would likely not materialize until after July, hinting that a decision on interest rates could be postponed. Waller believes the tariffs will have a temporary effect on inflation, predicting they may raise prices without significantly affecting employment or growth in the long term.
He reiterated that the economic theory suggests the tariffs will result in a one-time increase in price levels. While the rising import costs could exert inflationary pressure, Waller noted that these effects could be mitigated by a decline in consumer demand and employment.
Waller acknowledged that managing inflation expectations without a reactive approach poses a challenge for the Fed, especially given past experiences with inflation perceptions during the pandemic. However, he maintained that if significant economic downturns or spikes in unemployment were to occur, he would be ready to reconsider the monetary policy stance.
Recent statements from various Fed officials underline a collective sentiment for patience as they analyze incoming data regarding tariffs’ influence on the economy. Fed President Beth Hammack echoed this sentiment, emphasizing the importance of careful monitoring before any changes to monetary policy are made.
While she acknowledged the potential for adjustments by June, she expressed skepticism about immediate action, pointing to the need for clearer data before making significant policy decisions.