Fed Waller signals further rate cuts with not significant inflation impact from tariffs policy 💵 EURUSD loses 0.4%

Federal Reserve Board of Governors member, Christopher Waller, commented US economy, inflation and tariffs impact today. Here is the highlight from his remarks.

Fed Waller

• I don't expect tariffs to have a significant impact on inflation. The current US rates are restrictive, though not tight enough to cause a recession.
• The labour market is not behaving like an economy that is overheating.
• A return to the zero lower bound does not seem likely anytime soon. 2010s may prove an outlier.
• Until Trump's policies are clear, it will be hard for markets and the Fed to assess the next year.
• In the near term, I don't think there will be a huge impact on inflation from tariffs.
• Geopolitical conflicts and tariffs could be a source of renewed price pressure. But I don't think draconian tariffs will be implemented.
• There is tremendous uncertainty around what will happen with tariffs. Lagged wage increases may ease ongoing service price inflation.
• The economy overall on solid footing, nothing to suggest labor market will weaken dramatically in coming months.
• Though recent inflation progress has been slow, much of that is due to imputed prices for housing and services that are a less reliable guide to underlying price pressures.
• Base effects will improve inflation in 2025; more recent monthly and other shorter-term data also indicates improvement to come.
• Inflation will continue to make progress towards 2%. I will support further cuts in 2025, but pace will depend on further inflation progress.
• US deficits may also be driving long yields higher. Long term yields may have more of an inflation premium, but, the Fed will fix that. 
• Central bankers have a broad set of challenges ahead, from aging populations to geopolitical conflict and challenges to globalization.
• Monetary rules are a good check on judgment but should not be used exclusively.

EURUSD (H1 interval)

EURUSD is still down 0.4% today, however US treasuries yields dropped from 4.72% to 4.68% after today macro readings and quite dovish Waller remarks. A pair is also pressured by weak macro readings from Germany.

Source: xStation5