Fed Governor Christopher Waller downplayed concerns that tariffs would have a significant, lasting impact on inflation, stating that their effect is likely to be “modest” and “non-persistent.” As a result, he favors “looking through” these effects when setting policy.

In a speech overnight, he emphasized that while economic uncertainty remains, Fed cannot afford to fall into a “recipe for policy paralysis” by waiting for absolute clarity regarding the administration’s policies.

However, he conceded that tariffs could have a larger impact than expected, depending on their size and implementation. At the same time, he pointed out that other policies under discussion could have positive supply-side effects, helping to ease inflationary pressures.

Waller defended Fed’s decision to hold rates steady in January, arguing that the current economic data “are not supporting a reduction in the policy rate at this time.”

He left the door open for future rate cuts, stating that “if 2025 plays out like 2024, rate cuts would be appropriate at some point this year.”

Full speech of Fed’s Waller here.

Fed Governor Michelle Bowman explained in a speech her support for keeping interest rates unchanged last month, citing the need for a patient approach while monitoring inflation developments.

She noted that after a 100 basis point rate adjustment through December, policy is now in a “good place,” allowing the Fed to “pay closer attention to the inflation data as it evolves.”

Bowman also highlighted the importance of assessing the impact of the administration’s policies on the broader economy, stressing the need for a “better sense of these policies” and their implementation.

On inflation, Bowman maintained a cautious outlook, expecting further moderation this year but warning that disinflation progress could remain “bumpy and uneven.” Bowman noted her concerns about “greater risks to price stability”, particularly with a still-strong labor market.

Full speech of Fed’s Bowman here.

Philadelphia Fed President Patrick Harker said in a speech today that the US economy continues to operate from a “position of strength”. While inflation remains above target, Harker expressed confidence that it is on track to ease over time, supported by resilient economic growth and a balanced labor market.

These factors, in his view, are “reasons enough for holding the policy rate steady.”

Harker avoided committing to a specific timeline for policy easing but stated that he remains “optimistic” about inflation’s continued decline, which would eventually allow Fed to lower rates “over the long run”.

However, he acknowledged uncertainty surrounding new economic policies, particularly regarding tariffs and immigration policies under President Trump’s administration.

Many economists warn that a combination of higher import taxes and stricter immigration measures could fuel inflation, complicating the Fed’s job of maintaining price stability. Harker admitted that the full impact of these policies remains unknown.

Atlanta Fed President Raphael Bostic signaled uncertainty over the timing of rate cuts, citing ongoing concerns about inflation and policy shifts under the Trump administration. Speaking at an event overnight, Bostic emphasized the need for “more clarity” before making any definitive moves on monetary policy.

He acknowledged the difficulty in assessing the current economic conditions, stating, “My view is until we have more clarity, it’s going to be impossible to make a judgment about where our policy should go and how fast and at what pace, and so we’re just going to have to get more information before we’re going to be able to move.”

He also provided his estimate for the neutral rate, which he sees in a range of 3%-3.5%. Currently, Fed’s target range stands significantly higher at 4.25%-4.5%. Bostic’s initial projection was to see rates move about halfway to neutral by year-end. but the timeline remains highly contingent on economic developments and inflation trends.

Fed Chair Jerome Powell acknowledged that the latest inflation data released yesterday confirms the US is making progress but is still “not there on inflation.”

Following January’s stronger-than-expected CPI report, Powell said in the Congressional testimony that Fed will “keep policy restrictive for now” to bring price pressures down.

Powell also underlined that the “economy is strong, the labor market is solid” allowing the Fed to keep a tight policy stance and wait for inflation to ease further.

He also emphasized that one month of higher readings should not be interpreted as a complete reversal of the disinflation trend, especially given that Fed’s preferred inflation measure, the Personal Consumption Expenditures index, typically runs below CPI.