A top official at the Federal Reserve said he did not expect the Supreme Court’s ruling against President Trump’s tariffs to alter his view on whether the central bank should cut interest rates, as he backed the idea of a continued pause on reductions if the labor market continued to show signs of stabilizing.
Christopher J. Waller, a governor at the Fed, on Monday acknowledged the extreme uncertainty around Mr. Trump’s tariffs, whose levels have whipsawed around in recent days after the Supreme Court deemed the universal levies the president imposed last year to be illegal.
Mr. Trump announced on Saturday an across-the-board, 15 percent tariff under a different statute, Section 122 of the Trade Act of 1974, which may be kept in place for 150 days. The administration has also floated imposing tariffs through another provision of the same law, called Section 301, which could lead to further charges. The president, in a news conference after the Supreme Court’s ruling, warned that tariff levels could end up being higher, not lower than before.
On Monday, Mr. Waller cited some potential benefits to the justices’ decision, noting that it “may have a positive impact on spending and investment, but how large that impact may be and how long it could last is unclear.”
He has long argued that tariffs will not have a lasting impact on inflation, and instead lead to only a temporary boost in consumer prices. On Monday Mr. Waller questioned whether companies would be able to lower prices if their tariff-related expenses declined, or if those prices would actually stay the same because of the new levies Mr. Trump was imposing.
“Traditional central bank wisdom suggests that we should ‘look through’ tariffs,” Mr. Waller said. “I did this when they went up and will do so if they come down.” As such, he said “this ruling is unlikely to have a significant impact on my view of the appropriate stance of policy.”
Last month, the Fed held rates steady at a range of 3.5 percent to 3.75 percent, the first pause since July. Between September and December, the central bank delivered three quarter-point cuts. Mr. Waller, who was at the time in the running to replace Jerome H. Powell as chair of the Fed, voted for the central bank to continue cutting at the January meeting, citing a fragile labor market. Mr. Trump instead tapped Kevin M. Warsh, a former governor, for the top job.
Since January’s meeting, however, economic data has pointed to a more benign picture. Monthly jobs growth in January rebounded to 160,000 jobs, while the unemployment rate ticked down to 4.3 percent. That occurred even after revisions to 2025 data that showed nearly no new jobs were created over the course of the year. Price pressures have also begun to resurface, according to the Fed’s preferred inflation gauge, but many economists, including Mr. Waller, expect the impact of tariffs to soon fade.
Against this backdrop, Mr. Waller hinted on Monday that he could support the Fed holding rates steady at its upcoming meeting on March 17-18 if forthcoming data to be released in February showed the labor market had indeed turned a corner. Mr. Waller said he would support another cut, however, if that did not transpire.
“But if the good labor market news of January is revised away or evaporates in February, it would support my position at the FOMC’s last meeting, that a 25-basis-point reduction in the policy rate was appropriate, and that such a cut should be made at the March meeting,” he said.
Mr. Waller said the odds of either outcome was “close to a coin flip,” as he pointed to several reasons to think that the forthcoming jobs market data would not be as rosy. Mr. Waller cautioned that jobs growth last month was concentrated in only a handful of sectors, including health care and construction, and that most other industries shed positions. He also added that January growth tends to be overstated.
”There is no dismissing the weakness of job creation in 2025, and, for the reasons I have noted, it won’t be a huge surprise if the strong January report turns out to be noise and not signal,” he said.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
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