More Cuts in 2025 Still on the Table, Fed's Top Official Says, Despite Tariff Concerns
1min read The Fed still has room to cut rates further this year, despite a hawkish tone from some policymakers in December, according to the central bank's top official.
Federal Reserve Governor Christopher Waller on Wednesday expressed his support for cutting interest rates further in 2025, despite the potential impact of new tariffs proposed by the Trump administration.
During a speech in Paris, Waller said he believes inflation will continue to make progress toward our 2 percent goal over the medium term and that further reductions will be appropriate. He noted that while tariff proposals raise the possibility of a new source of upward pressure on inflation, he expects their impact to be limited.
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.
Waller's remarks come as the latest ADP jobs report showed weaker-than-expected job growth in December, with the private sector adding 122,000 jobs, down from 146,000 in November and less than the Dow Jones consensus forecast of 136,000. The official nonfarm payroll data is due to be released on Friday.
My bottom-line message is that I believe more cuts will be appropriate, Waller said, adding that the pace of those cuts will depend on the progress made on inflation while keeping the labor market strong.
The unemployment rate currently stands at 4.2%, and Waller does not see signs of the job market dramatically weakening in the coming months. While he didn't specify how many rate cuts the Fed could make this year, he said he believes more cuts will be appropriate if the economic outlook evolves as he has described.
Waller's comments contrast with those of some of his Fed colleagues, who have struck a more cautious tone in recent days. Federal Reserve Governor Lisa Cook, for example, said it makes sense to lower interest rates more gradually given the resilience in the job market and the stickier-than-expected inflation.
As the Fed prepares for its next meeting on January 28-29, following the inauguration of President Trump, central bank officials will be closely monitoring inflation and the labor market to guide their monetary policy decisions.