Fed's Powell: Tariff impact may be short-term disturbance, support rate cut by end of year if inflation remains under control.

Christopher Waller, a Federal Reserve Board member, stated during a speech in Seoul, South Korea on Monday that although the Trump administration's tariff policies may temporarily push up prices, if inflation pressures do not worsen and the labor market remains strong, he still supports the Fed considering a rate cut in the second half of 2025. This statement continues the Fed's recent cautious approach to monetary policy and allows for flexibility in future policy adjustments. Waller analyzed that the impact of the Trump administration's tariff adjustments on prices may be temporary. He emphasized that if the final tariff rates end up at the lower end of market expectations (around 10%), the resulting inflation pressure is likely to be a one-time pulse rather than a sustained upward trend. Currently, the target range for the federal funds rate in the US is maintained at 4.25%-4.5%. Waller believes that the resilience of the labor market since April (with unemployment rate below 4% for three consecutive months) and marginal improvements in core inflation have provided a "precious time window" for the Fed to observe the impact of trade policies. In terms of managing inflation expectations, Waller stated a preference for financial market trading data and professional forecasts, as they both predict that price pressures will remain under control. Waller pointed out that actual economic data also confirms that consumer inflation expectations have not shown significant signs of deterioration. Waller's speech reflects the policy game within the Federal Reserve. On one hand, his statement of supporting a rate cut at the end of the year if conditions are met aligns with the inclinations of officials such as Atlanta Fed President Bostic; on the other hand, his emphasis on the lagged effects of tariffs and risks from the unemployment rate is consistent with the cautious stance of officials like San Francisco Fed President Daly. This game surrounding tariffs, inflation, and interest rates is becoming a key variable in shaping global asset pricing in the second half of the year. Waller's speech once again highlights that amid trade policy uncertainty, the Fed's monetary decision-making is delicately balanced between "anti-inflation" and "stable growth."