Really??? You think???

War with Iran could weaken the US economy more than expected, key Fed official says

By Lucy Bayly

If the war with Iran continues for many more months, US consumers are likely to “start backing off,” Federal Reserve Governor Chris Waller told CNBC this morning.

Consumer spending drives two-thirds of US economic activity.

“They’re looking at their gas tank, they’re looking at the price, and they’re seeing how much is going into their car versus going into other things,” Waller said. “That starts affecting consumers’ outlooks on the economy.”

“So all these things could end up tipping the [economy], I don’t want to say, into a recession, but suddenly a much more weakening of the economy than we thought,” he said.

President Donald Trump has urged the Fed to slash interest rates to boost the US economy. However, central bank officials have opted so far this year to keep interest rates at their current levels as they parse the effects of tariffs and monitor a weakening labor market.

But Waller, who was appointed to his role by Trump in his first term and was on Trump’s short list to replace Fed Chair Jerome Powell, said he had been ready to cut rates — until he saw the February jobs report on March 6, which showed that the US economy lost 92,000 jobs that month.

“I thought, that’s it, I’m dissenting. I’m supporting a rate cut,” he said of the upcoming monetary policy decision.

However, since that time, the Strait of Hormuz has closed, he said. “This is looking like it’s going to be a much more protracted conflict. And oil prices are going to stay high for a longer time. So that suggested inflation was more of a concern than I was putting it.”