Federal Reserve official Christopher Waller isn’t mincing words about tariff-driven inflation. While April’s CPI showed cooling at 2.3% annually, new tariffs are already forcing companies like Mattel to hike prices. Waller warns that rushing to slash rates could backfire spectacularly, potentially rekindling the inflation monster they’ve worked so hard to tame. The Fed’s staying put for now, watching the economic tea leaves before making any dramatic moves. There’s more to this story than meets the eye.
The timing couldn’t be worse.
April’s inflation data showed signs of cooling, with the Consumer Price Index rising just 0.2% for the month and annual inflation hitting 2.3% – its lowest level since February 2021.
Now those gains might evaporate faster than a summer puddle in Phoenix.
Recent progress on taming inflation could vanish rapidly, leaving the economy back where it started: overheated and unstable.
Powell and his Fed colleagues face an uncomfortable dilemma: cut rates to boost growth or hold steady to manage inflation.
It’s like trying to drive with one foot on the gas and one on the brake.
The tariffs, which kicked in during April 2025, are already giving economists heartburn as they scramble to adjust their forecasts.
The core CPI rose 2.8% annually, underscoring persistent inflationary pressures despite recent improvements.
The Fed’s internal debates have gotten spicier too.
Fed governor Christopher Waller expects the tariff impact to be temporary, but he’s also worried about recession risks.
Meanwhile, some Fed officials are splitting from the pack on how to respond.
Talk about awkward family dinners at the Federal Reserve.
Consumer prices are now caught in the crossfire.
These economic challenges reflect the complex business cycles that naturally occur in modern economies.
Importers pay these tariffs, but they’re not exactly known for their generosity – those costs typically get passed on to consumers faster than you can say “inflation.”
Companies like Mattel and Stanley Black & Decker have already announced price hikes to offset the tariff costs.
And businesses? They’re about as happy as a cat in a rainstorm.
The Fed’s keeping its poker face for now, holding rates steady while they watch the economic cards fall.
Powell’s made it clear – they’ll let the data drive their decisions, not political pressure.
But with tariffs threatening both stable prices and jobs, the Fed’s dual mandate is starting to look like a high-wire act without a net.
