1. Waller expects Trump's tariffs to cause transitory inflation spikes. 2. Larger tariffs could lead inflation to 4%-5%, while smaller tariffs around 3%. 3. Fed may cut interest rates depending on the impact of tariffs. 4. Higher unemployment anticipated if tariffs remain high and growth slows. 5. Past inflation experiences influence Waller's cautious approach to forecasting.
The forecasts provided by Waller indicate both potential inflation spikes and Fed rate cuts, leading to uncertainty. Historically, such mixed signals can lead to a neutral reaction in the S&P 500 as it weighs growth versus inflation risks.
The article touches on inflation expectations and Fed actions, both critical to market performance. Any deviation from expected inflation paths or monetary policy can directly sway S&P 500 valuations.
The potential impact of tariffs and corresponding rate cuts is likely to unfold in the near future, similar to previous instances where economic data rapidly influenced market responses.