Fed’s Waller Says He’d Support Rate Cuts If Tariffs Drive Job Losses

Federal Reserve Governor Christopher Waller said firms may begin laying off more workers if aggressive tariff levels are reinstated by the Trump administration, and he’d support rate cuts if there’s a significant rise in unemployment.

“It wouldn’t surprise me that you might start seeing more layoffs, a tick up in the unemployment rate going forward if the big tariffs in particular come back on,” Waller said Thursday in an interview on Bloomberg Television with Michael McKee. “I would expect more rate cuts, and sooner, once I started seeing some serious deterioration in the labor market.”

President Donald Trump on April 2 announced steep, so-called reciprocal tariffs on several countries, but subsequently placed those plans on hold for 90 days to allow for negotiations. Trump nonetheless implemented a baseline global tariff of 10%, and has imposed levies in excess of 100% on China.

Waller stressed he didn’t believe the impact of tariffs would have a significant impact on the economy before July, but after that point unemployment could rise, and quickly, if high tariffs again come into play. He repeated his view that the inflationary impact of the tariffs would likely be temporary.

That sets him apart from other Fed policymakers, including Chair Jerome Powell, who have cautioned that higher levies could lead to persistent inflation and create tension between the central bank’s dual responsibilities to foster both maximum employment and stable prices.

In an April 16 speech, Powell stressed it was the central bank’s obligation to ensure tariffs don’t trigger a more persistent rise in inflation. Waller appeared less concerned about that risk.

“I’m willing to look through whatever tariff price effects there are,” Waller said Thursday.  “I’m not going to overreact to any increase in inflation that I think is attributable to the tariffs, but if I see a significant drop in the labor market, then the employment side of the mandate, I think, is important that we step in.”

Rates on Hold

The Fed has kept interest rates steady so far this year, and Powell has repeatedly said the central bank is in no hurry to make any adjustments.

In a separate interview on Thursday, Cleveland Fed President Beth Hammack said the central bank could move interest rates as early as June if it has clear evidence of the economy’s direction.

“If we have clear and convincing data by June, then I think you’ll see the committee move if we know which way is the right way to move at that point in time,” Hammack said Thursday during an interview with CNBC when asked specifically about June.

Hammack reiterated she’s not operating with a “base case” of the most likely outcome for the economy. She said it’s unlikely officials will have enough information to take action by their May meeting, but said they could move in following meetings once there is more evidence on the likely path for growth and inflation.

Fed policymakers next meet May 6—7 in Washington.

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