US Fed official flags job market risks ahead of rate meeting

The US central bank has been cautiously monitoring the effects of President Donald Trump's sweeping tariffs this year as it decides when to reduce the benchmark lending rate further -- trying to balance between keeping inflation down and a healthy jobs market.

Fed governor Christopher Waller told Bloomberg Television Friday that the labor market is now in a "hold pattern."

"They're not hiring, they're not firing, they're just watching. And that's kind of what you see in this underlying private sector data," he said.

"It wouldn't take much to sort of tip it," he added, emphasizing that indicators do not point to "a super healthy private sector labor market."

The Fed has held interest rates steady at a range between 4.25 percent and 4.50 percent this year, drawing ire from Trump as the president repeatedly chastised Powell for not slashing rates despite so-far relatively tame inflation.

Fed officials expect to have a better read of the tariffs' effects -- particularly on prices -- over the summer months.

But a rapidly weakening labor market could shift its calculus, and policymakers could opt for an earlier rate cut to boost the economy.

Waller said Friday that he does not commit to decisions before policy meetings, as the Fed's rate-setting committee prepares to gather later this month.

He stressed that "we live in a world in which we have to respond to real time data."

A day earlier, Waller told an event in New York that he believes tariffs bring a one-off price increase and said it makes sense to lower rates by a 25 basis points in two weeks.

He added in remarks that duties could push up inflation later this year, but there remains much uncertainty about how trade deals or escalating conflicts could change that outcome.

He also expects the cost hikes from tariffs to be shared between consumers, foreign suppliers and US businesses.

Waller said Thursday: "With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate."

Trump on Friday reiterated his criticism of Powell over interest rates, writing on social media: "And the Fed Board has done nothing to stop this 'numbskull' from hurting so many people. In many ways the Board is equally to blame!"

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