Federal Reserve Governor Christopher Waller indicated on Monday that he anticipates the effects of tariffs imposed by former President Donald Trump on prices to be “transitory.” This marks a return to a term that had previously attracted scrutiny during the last surge in inflation.
“I can already hear the criticisms, suggesting that this must be a mistake based on the events of 2021 and 2022. However, just because the outcome didn’t align with expectations before doesn’t mean we should disregard such thinking today,” Waller remarked during a policy speech in St. Louis, where he likened his inflation perspective to the contentious football play known as “Tush Push.”
Waller presented two potential scenarios regarding how the tariffs could influence inflation. He suggested that a more significant and prolonged imposition of tariffs could initially elevate inflation to a range of 4% to 5%, followed by a decline as economic growth diminishes and unemployment rises. In contrast, a scenario involving smaller tariffs would see inflation peak around 3% before tapering off.
Regardless of the scenario, Waller noted that the Federal Reserve would likely respond by cutting interest rates—merely the timing would differ. If larger tariffs are enacted, a rate cut might be necessary to stimulate growth, while less extensive tariffs could pave the way for a “good news” rate reduction later this year, he explained.
“Indeed, I am suggesting that I foresee elevated inflation as temporary, and by ‘temporary,’ I mean transitory,” he stated. “Despite the fact that the last surge in inflation starting in 2021 lasted longer than I, and other policymakers, initially anticipated, my current assessment is that any inflation increase resulting from tariffs will be short-lived.”
The phrase “transitory” evokes memories of the inflation spike experienced in 2021, which many Fed officials and economists believed would subside as supply chain disruptions and demand patterns stemming from the Covid pandemic normalized.
Nonetheless, inflation persisted, reaching levels not seen since the early 1980s, necessitating a series of aggressive rate hikes. While inflation has significantly decreased since the Fed began raising rates in 2022, it continues to surpass the central bank’s target of 2%. The Fed slashed its benchmark borrowing rate by a full percentage point in late 2024 but has refrained from further reductions this year.
A Trump appointee during the former president’s first term, Waller utilized a football analogy to elucidate his beliefs regarding “transitory” inflation, referencing the Philadelphia Eagles’ well-known “Tush Push” play, which has proven effective in short-yardage and goal line scenarios.
“Imagine you’re the Philadelphia Eagles facing a fourth down just inches from the goal line. You opt for the Tush Push but fail to convert on the attempt,” he explained. “Just because it didn’t pan out as expected doesn’t mean you shouldn’t call for the Tush Push the next time you find yourself in a similar predicament. I don’t think that makes sense.”
Waller elaborated that Trump has two potential goals regarding the tariffs: either maintaining the high levies as a means to reshape the economy or using them as a strategic negotiating tool. In the first scenario, he predicts economic growth would slow “to a crawl,” accompanied by a “significant” rise in unemployment. Conversely, if the tariffs are reduced through negotiation, he expects the inflationary impact to be “significantly smaller.”
Waller further articulated that the current tariff situation represents “one of the biggest shocks to affect the U.S. economy in many decades,” complicating the processes of forecasting and policymaking. He emphasized that Fed officials must remain “flexible” as they navigate the future.
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