Christopher J. Waller
Governor, Federal Reserve
Analysis
Governor Waller's stance remains easing-biased despite recent labor market strength, grounded in his conviction that underlying inflation—stripped of temporary tariff effects—sits near the FOMC's 2 percent target, which he argues removes the traditional inflation constraint on further rate cuts. His explicit dissent in January for "another cut" to bring policy "closer to a neutral setting" and his acknowledgment that improved data could only "tilt toward a pause" (rather than tightening) demonstrates he views the labor market's downside risks as the binding constraint warranting continued policy accommodation. By systematically dismissing tariff-driven inflation as transitory and emphasizing that "core" inflation around 3 percent still provides room for easing, Waller frames monetary policy's primary obligation as supporting employment rather than preemptively tightening against price pressures.
Key Passages
"If these data support the idea of an improvement in the labor market in January that continued in February, along with additional progress toward 2 percent inflation, that could result in my outlook turning a bit more positive and my view of appropriate monetary policy may tilt toward a pause at our upcoming meeting, a possibility that I will discuss in greater detail in a moment."
"Based on what we know today, PCE inflation targeted by the FOMC is estimated to have been higher than CPI inflation in January, around 2.8 percent over the previous 12 months, with core, a better guide to future inflation, about 3 percent over that same period."
"So, I estimate that what I call underlying inflation–inflation without the effects of tariffs–is close to the FOMC's 2 percent goal."
"Over 2025, the inflationary effects from tariffs tended to be smaller than expected, in part from downward adjustments to the ultimate size of tariffs."
"In any case, since tariffs only temporarily affect inflation, that is why I consider underlying inflation for my policy decisions."