Federal Reserve Governor Christopher Waller has expressed his expectation that President Donald Trump’s tariffs will have a temporary impact on prices, describing it as “transitory.” The term is reminiscent of the central bank’s previous use during the 2021 inflation surge. Despite last year’s experience, where prices rose unexpectedly despite initial projections, Waller believes that higher inflation due to tariffs will be short-lived.
Waller presented two possible scenarios for the impact of tariffs on the economy and inflation. In the larger tariff scenario, a 4-5% inflation spike could occur initially before tapering off as growth slows down. Conversely, smaller tariffs might lead to an inflation rate of around 3%, which would eventually decrease. Regardless of the outcome, Waller expects the Fed to cut interest rates, with timing being the only variable.
The governor believes that elevated inflation due to tariffs will be temporary and may even necessitate a “good news” interest rate cut later this year.
Source: https://www.cnbc.com/2025/04/14/fed-governor-waller-sees-tariff-inflation-as-transitory-in-tush-push-comparison.html