Federal Reserve Governor Waller made it clear on Thursday (March 6) that he strongly opposes a rate cut at the March policy meeting, but believes that if inflationary pressures continue to weaken, a rate cut later this year is still possible. Waller's remarks reflect the Federal Reserve's cautious stance between trade war uncertainty and inflationary pressures. Although the market has extremely low expectations for a rate cut in March, there are still differences on the possibility of a rate cut for the May and June meetings. Waller's statement provides important clues for the future policy path of the Federal Reserve.

Reasons for opposing the March interest rate cut

Waller emphasized that interest rate cuts should not be made at the Federal Open Market Committee (FOMC) meeting on March 18-19, mainly due to the lack of latest inflation data support. He pointed out that President Trump's trade agenda has brought serious uncertainty, making it inappropriate to adjust interest rates in the current environment. Waller said he hopes to see further progress on inflation data and tariff policies in February before deciding whether to support a rate cut.

2. Open attitude towards interest rate cuts later this year

Despite opposing the March rate cut, Waller has not completely ruled out the possibility of a rate cut this year. He stated that if inflationary pressures continue to weaken, a rate cut may become a reasonable choice "at some point after March". Waller mentioned that the monetary policy outlook proposed by the Federal Reserve at its December meeting is still feasible, which is to cut interest rates twice this year and twice next year. He believes that there is "no problem" with this expectation, even though the actual results may be slightly different.

3. The impact of trade wars on monetary policy

At the time of Waller's remarks, the Trump administration was imposing significant tariffs on major trading partners, exacerbating market concerns about the economic outlook. Economists generally believe that tariffs will push up inflationary pressures and may suppress economic growth. However, Waller is relatively optimistic about the impact of tariffs, believing that tariffs will only "moderately" increase prices and that the effects will be "unsustainable". However, he acknowledges that there is still uncertainty regarding the specific details and impact of tariffs, which makes Federal Reserve officials cautious about the monetary policy impact of tariffs.

4. Market expectations and policy paths

At present, the financial market believes that the possibility of the Federal Reserve cutting interest rates in March is extremely low, but there are differences in expectations for the rate cuts at the May and June meetings. Waller's remarks indicate that the Federal Reserve will closely monitor inflation data and changes in trade policy in the coming months to decide whether to adjust interest rates. He emphasized that changes in economic conditions and Trump's policy shift have made it more difficult to predict policy paths through historical comparisons.

summarize

Waller's statement highlights the Fed's cautious balance between trade war uncertainty and inflationary pressures. Although the possibility of a rate cut in March has been ruled out, the door to a rate cut later this year remains open. In the future, the policy path of the Federal Reserve will depend on the performance of inflation data, the progress of trade wars, and changes in economic fundamentals. Against the backdrop of increasing global economic uncertainty, the Federal Reserve's "wait-and-see" strategy may become the key to dealing with complex situations.