• Fed Governor Christopher Waller states recent tariffs will cause only a temporary, one-off price increase rather than persistent inflation
  • Underlying inflation excluding tariff effects is close to the Fed's 2% target, with inflation expectations remaining well anchored
  • Waller supports additional rate cuts due to weak labor market conditions, seeing no risk of sustained inflation acceleration

Federal Reserve Governor Christopher Waller has reiterated that the inflationary impact of recent tariffs is not as large as initially feared and will manifest as a temporary increase in the price level rather than a persistent driver of inflation. Speaking at an economic conference on Tuesday, Waller emphasized that underlying inflation, when stripping out tariff effects, remains close to the central bank's 2% target.

"The effects we've seen from tariffs so far have been smaller than many expected," Waller told attendees, according to people familiar with his remarks. "What we're looking at is a one-off increase in the price level, not a sustained acceleration in inflation."

The Fed governor pointed to several factors moderating the tariff impact, including slow inventory drawdowns by businesses and only partial pass-through of costs to consumers. Importers and exporters have been adjusting to new tariff regimes, with many companies absorbing costs rather than immediately raising prices for end consumers.

Waller's assessment comes as U.S. inflation, measured by the Personal Consumption Expenditures index, ran at 2.8% for the 12 months through September 2025, while the Consumer Price Index stood at 3.0%. Despite these figures, the Fed official maintained that inflation expectations remain well anchored in financial markets and among consumers.

The labor market's recent weakness has emerged as a more significant concern for Waller, who cited slowing payroll gains and unemployment approaching the Fed's longer-run estimate as justification for additional monetary easing. "With the labor market showing clear signs of cooling and underlying inflation close to our target, there's room for further adjustment to our policy stance," he said.

Real GDP growth has slowed in the second half of 2025 after a strong second quarter, according to recent economic data. Consumer and business surveys indicate expectations of slower economic activity ahead, though not the kind of runaway inflation that would typically prompt tighter monetary policy.

Waller's comments align with the Fed's historical approach of "looking through" temporary price shocks, whether from oil price spikes, pandemic-related supply disruptions, or previous tariff episodes during the 2018-2019 U.S.-China trade war. In each case, the central bank maintained its focus on underlying inflation trends rather than reacting to transitory factors.

Attempts to reach other Fed officials for additional comment on the timing of potential rate cuts were unsuccessful. The Fed's next policy meeting is scheduled for December, where markets currently anticipate at least a quarter-point reduction in the benchmark interest rate.

Correction: An earlier version of this article misstated the current unemployment rate relative to the Fed's longer-run estimate. The unemployment rate is approaching, not exceeding, that estimate.