Bigger rate cut may be needed if large tariffs persist: Fed official
WASHINGTON
The U.S. central bank may need to make a bigger-than-expected interest rate cut if President Donald Trump keeps large tariffs in place for an extended period, a top Fed official has warned.
"Economic growth is likely to slow to a crawl and significantly raise the unemployment rate," Federal Reserve governor Christopher Waller told an event in Missouri.
Waller expects elevated inflation "would be temporary," but noted that it could go as high as 5 percent in the near-term, and said the effects "on output and employment could be longer-lasting."
"If the slowdown is significant and even threatens a recession, then I would expect to favor cutting the FOMC's policy rate sooner, and to a greater extent than I had previously thought," he said, referring to the Fed's rate-setting committee.
He added that with a rapidly slowing economy in this scenario, the risk of recession would likely outweigh the risk of escalating inflation.
The U.S. central bank has held interest rates steady at 4.25 to 4.5 percent since the start of this year.
