Federal Reserve governor Christopher Waller said in a Thursday interview with FOX Business that markets are increasingly focused on fiscal policy and are signalling concerns, particularly regarding the need for greater fiscal discipline. He emphasised that the Fed will not participate in primary bond auctions.
Waller noted that hard data continued to show that the U.S. economy is doing quite well, with little evidence so far of negative effects from tariffs. He added that he believes if tariffs are closer to 10%, then the U.S. economy is a good shape for the second half of the year. Waller also noted that if tariffs settle down, the Fed could be in a position to cut in the later part of the year. He expressed increased optimism on tariffs compared to the previous month, viewing the administration’s current path as a good one.
While acknowledging that firms are pausing rather than cancelling their plans, Waller reiterated his opinion that tariffs would likely result in a one-time price increase rather than persistent inflation. He reaffirmed that the Fed’s standard approach is to look through such transitory effects.
The Fed's governor also observed that the market had anticipated more fiscal restraint from Trump's tax bill, but expressed belief that as long as the economy gets back on a good path, demand for U.S. assets could be reinvigorated.