From Yahoo Finance: 2025-04-11 17:01:00

Federal Reserve officials are concerned that President Trump’s tariffs will hinder the central bank’s ability to control inflation and maintain high employment levels. Tariffs could lead to increased consumer prices, exacerbate inflation, slow economic growth, and result in job losses. The Fed may need to choose between combating inflation or supporting the labor market.

The U.S. economy is expected to experience higher inflation and slower growth due to President Trump’s escalating trade war, according to Federal Reserve officials. The central bank, like other experts, is monitoring the impact of trade wars on consumer prices and economic growth, which could challenge the Fed’s dual mandate of controlling inflation and promoting employment.

Susan Collins, president of the Federal Reserve Bank of Boston, predicts inflation rates exceeding 3% this year, well above the Fed’s 2% target. The Fed may intervene to stabilize financial markets if necessary. Albert Musalem of the St. Louis Fed suggests using monetary policy to counter tariff-induced price increases, recognizing the challenges of high inflation and a sluggish economy.

The Fed’s primary tool to address inflation and employment concerns is adjusting the federal funds rate to impact borrowing costs. Austan Goolsbee of the Chicago Fed warns of potential stagflation caused by tariffs, which could lead to rising prices, job losses, and economic slowdown. Jeff Schmid of the Kansas City Fed emphasizes the need to balance inflation risks against growth and employment considerations.

Federal Reserve officials are bracing for the potential impact of higher inflation and slower growth resulting from President Trump’s tariffs. The Fed may need to navigate a delicate balance between addressing inflationary pressures and supporting the labor market amidst escalating trade tensions.

Read more: Fed Officials Are Bracing For Higher Inflation, Slower Growth From Tariffs