The Federal Reserve will still be able to cut interest rates this year, with recent data supporting this outlook, Fed Governor Christopher Waller said on Monday.

Speaking at a conference in South Korea, Waller said that a rise in inflation from President Donald Trump's trade tariffs was unlikely to be persistent, giving the Fed more confidence to lower rates later this year.

If "underlying inflation continues to make progress to our 2% goal," along with tariffs settling at lower rates and employment remaining "solid," "I would be supporting good news rate cuts later this year," Waller said.

The Fed governor flagged recent progress on inflation in April, and noted that the labor market also remained strong, giving the central bank additional time to see how trade negotiations play out, before needing to decide on interest rates.

Waller's comments come just days after PCE price index data- the Fed's preferred inflation gauge showed some cooling in inflation in April, although core prices still remained above the Fed's 2% annual target.

But uncertainty over the U.S. economic outlook ramped up in recent weeks, especially amid Trump's sporadic policy decisions on trade tariffs. Recent signs of deterioration in U.S.-China ties added to these concerns, as investors lost confidence that a more permanent trade deal between the two will be reached.

The Fed had in May left interest rates unchanged and said it was unlikely to cut in the near-term, citing increased uncertainty over trade and the economy.

Waller noted that the U.S. economy had so far seen little impact from Trump's tariffs, although this could change in the coming months.

He warned that higher tariffs could still push up costs for local businesses, resulting in potential payroll cuts and higher inflation.

Speaking on the recent sell-off in Treasuries, Waller said the risk-off sentiment towards U.S. debt was "not really that big," but was still in play.

Source: Investing.com