Federal Reserve Governor Waller: The U.S. economy faces a "tricky combination" and may maintain interest rates at the current level for a longer period of time.

Federal Reserve Governor Waller said on Friday that the current economic environment is posing greater challenges for interest rate decisions, and the central bank may need to maintain interest rates unchanged for a longer period of time. Waller pointed out that the US economy is facing a "tricky combination" of potentially prolonged inflationary pressures on one hand, and stagnant job growth but overall stable labor market on the other. In this context, policymakers need to strike a balance between controlling inflation and supporting employment. Waller said in a public speech, "High inflation coexisting with a weak labor market is a very complex situation for policymakers." He emphasized that if the risk of inflation is higher than the risk of employment, maintaining the current interest rate range would be a reasonable choice. Currently, the market generally expects the Federal Reserve to keep interest rates unchanged this year in the uncertain economic outlook. Waller's latest remarks also reflect a change in his assessment of the labor market. While he had expressed concern about a slowdown in hiring before, the latest signs indicate that the pace of hiring needed to maintain a stable unemployment rate may be close to zero, meaning the job market can still remain relatively balanced in a low-growth environment. However, he warned that businesses are walking a tightrope, as they have struggled to find suitable employees before, and their cautious attitude towards the economic outlook may lead them to quickly turn to layoffs in the face of economic shocks. In terms of inflation, Waller is relatively more cautious. He believes that the price shocks caused by the US-Iran war may not be a temporary phenomenon, and the combination of cost increases from previous tariff policies could lead to more sustained upward pressure on inflation. He noted that these continuous price shocks may be similar to the situation during the COVID-19 pandemic, which could then lead to inflation staying elevated for a longer period of time.