ME News message: On April 18 (UTC+8), Federal Reserve Board Governor Waller said that, due to the energy shock caused by the Iran war, he is cautious about whether a rate cut will be needed in the short term, and warned that the conflict could have a sustained impact on inflation. In his remarks, Waller outlined two main scenarios. 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 softening labor market. He said, “If this happens, I think there is a prospect that underlying inflation will continue to fall back toward the 2% target, which would make me cautious about rate cuts at present and more inclined to support the labor market through rate cuts later this year, when the outlook is more stable.” However, he warned that oil prices and the broader market are underestimating the risk that the conflict will drag on. “In terms of inflation, the risk is the duration of the conflict”

MeNews

2026-05-24 00:38:04

ME News Report, April 18 (UTC+8), Federal Reserve Board Member Waller stated that due to the energy shock triggered by the Iran conflict, he remains cautious about whether a rate cut is needed in the short term and warned that the conflict could have a sustained impact on inflation. Waller outlined two main scenarios in his speech. In the first scenario, if the Strait of Hormuz reopens and trade flows return to normal, officials will be able to ignore the surge in energy prices and shift their focus later this year to a weakening labor market. He said, "If this occurs, I see a prospect where inflation continues to fall toward the 2% target, which would make me cautious about current rate cuts and more inclined to support the labor market through rate cuts later this year when the outlook is more stable." However, he warned that oil prices and the overall market are underestimating the risk of prolonged conflict. "In terms of inflation, the risk is that the longer the conflict persists and energy prices stay high, the greater the likelihood that these elevated prices will permeate other prices, as businesses will incorporate high energy costs into their pricing." He stated that if this happens against a backdrop of a weak labor market, it would limit policy response space. In such a scenario, he would weigh the risks of higher inflation against a weaker labor market, "If the inflation risk exceeds the labor market risk, it may mean maintaining the policy rate within the current target range." (Source: Jin10)

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BetaParanoiac

· 10h ago

The market has indeed been underestimated; even the VIX hasn't moved much.

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MistValleySignpost

· 11h ago

If the Strait of Hormuz is truly blocked for over three months, the 2% inflation target will be a joke.

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BridgeHopster

· 12h ago

Waller's statement is quite subtle; he wants to leave room for rate cut expectations in the market but is also afraid that oil prices might suddenly spike.

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GateUser-03ce08c7

· 13h ago

Interest rate cuts later this year = at least after Q3

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TheRedTelephoneBoothInTheRuins

· 13h ago

The warning about the long-term escalation of conflicts is very accurate, but no one listens.

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GateUser-509018a9

· 13h ago

Two scenarios = two ways of speaking; in practice, it's a matter of adjusting as you go.

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FudAlsoNeedsAnImage

· 13h ago

Waller is considered somewhat cautious among the dovish group; if he's saying that, then there's basically no chance before July.

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L2NightRunner

· 14h ago

If the surge in energy prices transmits to core PCE, Powell will have a headache again

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BoringButBullish

· 14h ago

The first scenario is too idealistic, it feels like just drawing a pie.

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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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