Federal Reserve Governor Waller: If there is a significant economic slowdown, I would prefer to cut interest rates earlier and more sharply

Mr. Waller, the Fed governor, said the new tariffs were one of the biggest shocks to the US economy in decades. I think high inflation due to tariffs will be temporary. If the current average tax rate of 25 per cent is maintained for a while, inflation could peak near 5 per cent; if it falls to 10 per cent, inflation could peak at 3 per cent. In the case of high tariffs, the drag on output and employment could be more permanent; unemployment could rise to 5 per cent. In the case of large tariffs, if there is a significant slowdown, I would prefer to cut rates sooner and more sharply than previously thought. With average tariffs below 10%, there will be limited impact on economic activity; I support a limited monetary policy response. In a smaller tariff scenario, the Fed is likely to be more patient and a rate cut is likely to occur in the second half of the year. Policy is highly uncertain and the Fed should remain flexible. A partial tariff hold may have broadened the range of potential outcomes, making the timing of (rate cuts) less certain. Inflation expectations have not lost their stability and are expected to fall back to more moderate levels in 2026. Monetary policy is significantly constraining economic activity and underlying inflation is expected to continue to moderate downward.