Fed Governor Waller: Rate Hike and Cut Equally Likely, Ready to Act on Inflation Expectations

The *World Economic Situation and Prospects as of Mid-2026* report released by the United Nations clearly pointed out that the Middle East crisis has posed a new round of shocks to the global economy, directly leading to a slowdown in global economic growth, a renewed climb in inflationary pressures, and a further intensification of global economic uncertainty. Notably, the impact of this crisis has been highly uneven, with developing countries bearing the brunt of the shocks. As things stand, global economic growth is expected to reach 2.5% in 2026, though this figure has been revised down by 0.2 percentage points from the January forecast.

Under this provisional agreement, the tariff concessions granted by the EU on US industrial products, certain agricultural products, and seafood will expire on the originally scheduled date if both sides do not decide to extend them. In addition, the EU plans to establish a "safeguard mechanism": if US goods imports surge sharply and cause serious damage to EU industry or agriculture, the European Commission will have the authority to launch an investigation and suspend the corresponding tariff concessions. Regarding steel and aluminum products, if the US maintains tariffs exceeding 15% on EU steel and aluminum derivative products before the end of 2026, the European Commission will likewise have the authority to suspend certain tariff concessions.

The US Fed meeting minutes revealed that many policymakers were inclined to abandon the easing bias, with most participants indicating that if inflation remained persistently above the 2% level, it would be necessary to tighten policy. Only a few officials supported future interest rate cuts, and the hawkish tone of the language far exceeded market expectations. Additionally, according to CME data, the market is now pricing in a 60% probability of the US Fed raising interest rates by 25 basis points before year-end, while expectations for interest rate cuts in 2026 have virtually disappeared.