Fed's Mussallem: Fed should be wary of continued tariff-driven inflation

On 11 April, according to Golden Ten Data, Fed's Mussallem said he is watching closely to see if rising short-term inflation expectations filter through to longer-term expectations, which could make it more difficult to fight inflation and reduce the Fed's flexibility in responding to weakness in the labour market. He noted that there is a high degree of uncertainty about the effects and timing of tariffs and other new policies, and that there is a ‘distinct possibility’ that inflation will re-accelerate even if the job market softens. He said the Fed's policy is in a favourable position and should remain vigilant. ‘I am cautious about the assumption that “the impact of higher tariffs on inflation will be only transient or limited,”’ he said. ‘I believe it is appropriate to “ward off” second-round effects through monetary policy, although in practical terms, distinguishing between potential inflation and the direct, indirect, and second-round effects of tariffs may be a challenge.’