Stocks rise as Trump suggests temporary exemptions for tech, auto, pharma

Federal Reserve governor Christopher Waller provided some support to markets after suggesting he would back the central bank to cut interest rates to help the economy, instead of focusing on higher inflation.

He pointed out that prices could see a transitory rise because of the tariffs but added that if Trump reverted to the crippling tariffs included in his “Liberation Day” on April 2 then officials would be ready to step in.

“If the slowdown is significant and even threatens a recession, then I would expect to favour cutting the… policy rate sooner, and to a greater extent than I had previously thought,” he said in comments prepared for an event Monday.

“In my February speech, I referred to this as the world of ‘bad news’ rate cuts. With a rapidly slowing economy, even if inflation is running well above two percent, I expect the risk of recession would outweigh the risk of escalating inflation, especially if the effects of tariffs in raising inflation are expected to be short lived.”

However, OANDA senior market analyst Kelvin Wong warned central bankers would face some tough choices.

“Combination of slowing growth and persistent inflation, hallmarks of a stagflation environment, poses a significant challenge for the US Federal Reserve, which may find it increasingly difficult to implement counter-cyclical monetary policies to support the economy,” he said in a commentary.