Federal Reserve Board Member Waller stated that due to the energy shock caused by the Iran conflict, he is cautious about a short-term rate cut and warns that the conflict could keep inflation persistently high. He proposed two scenarios: if the Strait of Hormuz reopens and energy and trade recover, inflation would fall back to 2%, and he would lean towards a rate cut later this year to support the labor market; if oil prices remain high and the labor market remains weak, policy space is limited, requiring a trade-off between higher inflation and a weaker labor market, and if inflation risks exceed labor market risks, the current rate would be maintained.

MeNews

2026-05-24 00:18:48

Abstract generation in progress

ME News report, April 18 (UTC+8). Federal Reserve Board Member Waller said that, due to the energy shock triggered by the Iran conflict, he is cautious about whether rate cuts are needed in the short term and warned that the conflict could have a sustained impact on inflation. Waller outlined two main scenarios in his remarks. In the first scenario, if the Strait of Hormuz reopens and trade flows return to normal, officials would be able to disregard the surge in energy prices and later this year shift their focus to a weakening labor market. He said that if this happens, “I see one prospect: that underlying inflation will continue falling back toward the 2% target, which would make me cautious about current rate cuts and more inclined to support the labor market with rate cuts later this year, when the outlook is more stable.” However, he warned that oil prices and the overall market have underestimated the risk of the conflict becoming prolonged. As for inflation, he said, the risk is that the longer the conflict lasts and the longer energy prices remain elevated, the greater the likelihood that these high prices will spill over into other prices, because businesses will factor high energy input costs into their pricing. He added that if this occurs against a backdrop of a weak labor market, it would limit the policy response space. In this situation, he would weigh the risks of higher inflation against those of a weaker labor market: “If the inflation risk exceeds the labor market risk, that may mean keeping the policy interest rate within the current target range.” (Source: Jintou)

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GateUser-9ccf7051

· 13h ago

This kind of statement is just cooling market expectations.

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TvlTeaTime

· 13h ago

Energy shocks + geopolitical risks, the market is going to shake a bit

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BorrowingBuddy

· 13h ago

Waller's statement basically amounts to saying nothing, leaving both sides stuck.

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OutsiderOfZhiyuandao

· 14h ago

The trader is going to modify the model again tonight.

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MechanicalHummingbirdGlass

· 14h ago

Interest rate cuts this year? Feels like they've gone dovish again

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SnackFi

· 14h ago

The policy space has been exhausted by the predecessor.

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WalletEarlyAccessAlarm

· 14h ago

Cautious hawkish stance, the US dollar has short-term support

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AMirroredSphereReflectingThe

· 14h ago

The 2% target now seems like a joke

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WatercolorGlassBottle

· 14h ago

Inflation or employment, pick one—it's an old script.

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ByteSizedAlpha

· 14h ago

If the Strait of Hormuz truly remains closed for a long time, oil prices breaking $100 is not a dream

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Federal Reserve Board member Waller is cautious about interest rate cuts, warning of long-term conflict risks

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