Fed’s Waller Doesn’t See Sustained Inflation from Iran War

Federal Reserve Governor Christopher Waller discusses the potential inflationary impact of war with Iran, US payrolls, ongoing risks from tariffs, and his view of private credit markets on “Bloomberg Surveillance.”  Federal Reserve Governor Christopher Waller Friday said he doesn’t expect the Iran war to have a sustained impact on inflation.

While consumers are likely to experience sticker shock as gas prices rise, policymakers will look through any one-off increases, he said.

“For us thinking about policy going forward, this is unlikely to cause sustained inflation,” Waller said Friday in an interview on Bloomberg TV. “That’s one reason we don’t look at energy prices. When we look at core, core is a better predictor of future inflation,” he added, referring to a measure of inflation that strips out volatile energy and food prices.

“It’s kind of very odd to think about the Fed maybe changing rates six months from now based on this,” he said.

Waller dissented from the Fed’s decision in January to leave its benchmark policy rate unchanged, saying he preferred a quarter-point reduction because of signs of continued softness in the labor market. The government’s employment report for January subsequently came in much better than expected. The February jobs report is due Friday at 8:30 a.m. in Washington.

Fed policymakers are expected to hold rates steady for a second consecutive time when they meet March 17-18. Officials have signaled they can be patient in considering additional rate cuts, given signs of stabilization in the labor market and inflation that remains above their 2% goal.

The Fed cut its benchmark rate three straight times at the end of 2025, in part to respond to signs of weakness in the labor market.

Interest rate swaps, which investors use to bet on Fed policy, show traders are pricing in about 35 basis points of rate cuts by year-end, compared with about 60 basis points at the end of last week.

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