Central banks have expressed concern over the uncertainty surrounding President Trump’s plan to impose tariffs on Canadian, Mexican, and Chinese products, as well as potentially the European Union. Policymakers warn that the impact of these tariffs on inflation could be long-lasting.
In recent days, multiple central bank officials have highlighted the potential risks of tariffs on prices. Chicago Fed President Austan Goolsbee cited supply chain threats including “large tariffs” and a potential escalating trade war. Economists typically view tariffs as having one-time impacts on prices, but Trump’s broad-based approach could lead to underlying inflation.
Federal Reserve officials are carefully watching the situation, which has led them to discuss possible policy actions. Chicago Fed President Austan Goolsbee noted that if inflation rises or progress stalls in 2025, the Fed will face a difficult decision on whether it’s due to overheating or tariffs.
The Federal Open Market Committee recently voted to hold its interest rate steady at 4.25% to 4.50%, as they evaluate evolving economic conditions. However, economists warn that Trump’s sweeping tariffs could generate underlying inflation concerns for the Fed.
Other officials, including Boston Fed President Susan Collins and Philadelphia President Patrick Harker, also expressed concern about potential inflationary effects. Chair Jerome Powell deflected questions about tariffs, saying it’s too early to assess fiscal policy implications.
Source: https://www.cnbc.com/2025/02/05/fed-officials-are-raising-concerns-about-trumps-tariffs-and-inflation.html