‘Fed Sounding Board’ : Fed Officials Warn of ‘More Persistent’ Inflation Risks from Tariffs

‘Fed Sounding Board’ Nick Timiraos says that Fed officials highlighted the risk of more persistent inflationary pressures from tariffs when they agreed to leave interest rates unchanged at last month's meeting. According to the minutes, ‘Most participants noted that the potential for inflationary effects from various factors was more persistent than they had anticipated.’ Officials at last month's meeting felt they were ‘well-positioned’ to deal with potential risks with their interest rate settings, the minutes showed. The minutes said the Fed could cut rates if labour market conditions worsened, or leave them unchanged if inflation worsened. But several policymakers pointed out that if inflation proves to be more persistent, while growth and employment prospects weaken, they may ‘face difficult trade-offs’.