Core Viewpoint - Federal Reserve Governor Christopher Waller suggests a potential interest rate cut later this year, driven by expected increases in unemployment and temporary inflation due to tariffs [1] Group 1: Inflation and Tariffs - Waller anticipates tariffs will raise inflation in the coming months, but believes that as long as inflation expectations remain stable, short-term price increases can be overlooked [1] - He outlined two scenarios regarding trade policy: a "large tariff" scenario with an average 25% tariff and a "small tariff" scenario with an average 10% tariff, with the latter expected to decrease over time through negotiations [2] - Waller expects the impact of tariffs on inflation to be temporary, estimating a 15% trade-weighted tariff on imported goods [3] Group 2: Employment and Economic Risks - Waller predicts that tariffs will lead to an increase in unemployment, although in the "small tariff" scenario, layoffs may be moderate [3] - He expresses concerns about economic activity and employment facing downward risks by the second half of 2025, while inflation faces upward risks, closely tied to trade policy developments [3] Group 3: Fiscal Deficit and Long-term Yields - Waller attributes the recent rise in long-term Treasury yields to growing concerns over the increasing U.S. fiscal deficit, which is expected to remain around $2 trillion, approximately 6% of GDP [4] - He notes that if debt issuance exceeds market expectations, it could lead to lower prices for bonds, affecting investor demand [4] Group 4: Stablecoins and Payment Systems - Waller views stablecoins as potential tools for introducing competition into the payment system, suggesting they could help reduce costs, especially for small and medium-sized enterprises in cross-border transactions [5]