Waller: Not certain how firms will respond to Supreme Court tariff ruling, but do not think it will influence views on appropriate monetary policy

Waller: Not certain how firms will respond to Supreme Court tariff ruling, but do not think it will influence views on appropriate monetary policy

Federal Reserve Governor James Bullard: Supreme Court Tariff Ruling’s Impact on Monetary Policy Remains Uncertain

The Supreme Court’s recent ruling invalidating key executive-imposed tariffs under the International Emergency Economic Powers Act (IEEPA) has sparked significant economic and legal debate, but Federal Reserve Governor Christopher Waller stated in a speech on February 23, 2026, that he does not expect the decision to alter his approach to monetary policy. The 6-3 decision in Learning Resources, Inc. v. Trump (Case No. 24-1287) struck down tariffs on imports from multiple countries, potentially unlocking up to $175 billion in refunds for affected businesses.

Waller acknowledged the ruling’s potential to ease inflationary pressures by reducing input costs for firms, but emphasized that tariffs had only temporarily influenced price trends. “Underlying inflation, excluding tariff effects, has been close to 2 percent for some time,” he noted, reiterating the FOMC's focus on core inflation metrics. The ruling could incentivize businesses to lower prices as refund opportunities materialize, though Waller cautioned that uncertainty remains about how quickly firms will adjust.

The decision also shifts trade policy authority toward Congress, requiring legislative action for future tariffs. While the Biden administration has signaled plans to reimpose tariffs using alternative statutes like Section 232 (national security) and Section 301 (unfair trade practices), Waller highlighted that such measures would likely have limited duration and thus minimal long-term inflationary impact.

Economically, the invalidated tariffs could provide relief to import-dependent industries, particularly small and midsize firms that bore significant cost burdens. However, the Treasury’s process for processing refunds—and potential legal challenges— remains unclear, complicating immediate economic forecasts. Waller stressed that the Fed’s policy decisions would prioritize labor market data and underlying inflation trends over short-term tariff-related fluctuations.

With the FOMC’s next meeting scheduled for March 17–18, Waller indicated his stance hinges on February’s employment and inflation data. “One month of strong job gains does not a trend make,” he said, underscoring the need for sustained labor market strength before considering policy adjustments. For now, the Supreme Court’s ruling, while economically significant, will not dictate his approach to monetary policy.