Federal Reserve Governor Christopher Waller said his "baseline" view is that the Trump administration's new tariffs will have only a modest impact on prices that the central bank should try to look through in setting monetary policy.

Uncertainty about the impact of trade or other administration policies, Waller said, shouldn't stall the Fed from acting if it is otherwise appropriate, just as Russia's invasion of Ukraine in 2022 and the collapse of Silicon Valley Bank in 2023 did not prevent the Fed from changing interest rates even though both incidents raised doubts about the economic outlook.

"My baseline view is that any imposition of tariffs will only modestly increase prices and in a nonpersistent manner. So I favor looking through these effects when setting monetary policy to the best of our ability," Waller said in remarks prepared for delivery to the University of New South Wales in Australia.

"I concede that the effects of tariffs could be larger than I anticipate," Waller said. "But we also need to remember that it is possible that other policies under discussion could have positive supply effects and put downward pressure on inflation."

"At the end of the day, the data should be guiding our policy action—not speculation about what could happen...Waiting for economic uncertainty to dissipate is a recipe for policy paralysis," he said.

The Fed is currently keeping interest rates steady as policymakers wait for data showing inflation moving further towards the central bank's 2% goal, with many of Waller's colleagues saying they also want more clarity about how administration trade and other policies may influence the economy.

Key measures of inflation are currently a half percentage point or more above the Fed's goal, and have shown little improvement in recent months.

Waller, appointed to the Fed by President Donald Trump in his first term, said he agrees policy should remain on hold until inflation is falling again. But that may only be a matter of time, he said, noting that a recent "disappointing" rise in the Consumer Price Index may reflect issues with seasonal data adjustment not rising price pressures.

As it stands "the data are not supporting a reduction in the policy rate," Waller said. "But if 2025 plays out like 2024, rate cuts would be appropriate at some point this year."

The Fed at its March meeting is expected to hold its benchmark interest rate steady at the current range of 4.25% to 4.5%.