When the Fed reduces its rate, over time it can lead to cheaper borrowing for mortgages, auto loans, and business loans, though those rates are also influenced by financial markets.
The ruling could have “a positive impact on spending and investment,” he said, but “how large the impact may be and how long it could last is unclear.”
Waller also noted that the White House is seeking to reimpose the tariffs using other laws, creating “considerable uncertainty over to what extent tariffs will continue.”
If February’s jobs report is similar to last month’s, “indicating that downside risks to the labor market have diminished, it may be appropriate” to keep the Fed’s short-term rate “at current levels and watch for continued progress on inflation and strength in the labor market,” Waller said in remarks to a conference held by the National Association for Business Economists.
“But if the good labor market news of January is revised away or evaporates in February,” he continued, “a cut should be made at the March meeting.”
“As things stand today, I rate these two possible outcomes as close to a coin flip,” Waller added.
The Fed governor also addressed a conundrum many economists have identified about the current economy: Growth is relatively solid, yet employers added few, if any, jobs last year. Waller said he thinks even the meager gains reported earlier this month for last year will be eventually revised to below zero.
“This would be the first time in my career, my life, that I saw an economy growing like this, and zero job growth,” Waller said. “I don’t even know quite how to think about this.” He added that hiring could pick up this year and largely resolve the contradiction.
Another explanation could be higher productivity, stemming from the pandemic, as companies learned to produce more with fewer workers.
“LOWER INTEREST RATES,” Trump posted. “’Two Late’ Powell is the WORST!!” he added, misspelling his usual nickname for Chair Jerome Powell, who he has referred to previously as “Too Late.”
