Federal Reserve Governor Christopher Waller said he is cautious about near-term
rate cuts, citing an energy shock from the Iran conflict and risks of persistent
inflation. He outlined two scenarios: if the Strait of Hormuz reopens and trade
normalizes, the Fed could look through energy price spikes and consider cuts
later this year as inflation trends toward 2% and the labor market softens.
However, he warned markets may be underpricing a prolonged conflict, which could
keep energy costs high and feed into broader prices, limiting policy
flexibility. In that case, Waller said rates may need to remain at current
levels. He added that sharply lower immigration reduces the need for job growth
to absorb workers, shaping the policy outlook.
