Key Takeaways:

  • Federal Reserve Governor Christopher Waller stated that not all tariffs directly impact consumer prices.

  • The current monetary policy remains restrictive, indicating that the Fed is still cautious about inflation risks.

  • Waller sees potential for rate cuts in 2025, but does not expect a rate cut in March.

  • The median forecast of two rate cuts in 2025 remains intact, though timing depends on economic conditions.

Fed Signals Patience on Rate Cuts Amid Restrictive Policy Stance

Speaking on March 7, Federal Reserve Governor Christopher Waller addressed the impact of tariffs and interest rate policy, noting that not all tariffs are directly passed on to consumers. He reaffirmed that monetary policy remains restrictive, meaning the current rate levels are still limiting economic expansion to curb inflation.

Waller suggested that the Fed is in no rush to lower interest rates, but remains open to cuts later in the year.

“The Federal Reserve could lower interest rates for both positive and negative reasons,” Waller stated, implying that cuts could be driven by either easing inflation or economic slowdowns.

No March Rate Cut, But Two Cuts Expected in 2025

Waller dismissed the possibility of a rate cut in March, reinforcing the Fed’s cautious approach. However, he noted that reducing rates after March remains on the table, contingent on inflation trends and economic data.

  • The current market consensus remains at two rate cuts in 2025, aligning with the median forecast of policymakers.

  • Any downturn in economic growth or inflation cooling faster than expected could accelerate the Fed’s rate-cut timeline.