U.S. Fed Warns Trump’s Tariffs Could Drive Up Consumer Prices.
American consumers could encounter increased prices if President Donald Trump proceeds with certain proposed tariffs, as cautioned by the US central bank.
The minutes from the Federal Reserve's January meeting, published on Wednesday, indicated that committee members are concerned that Trump's policies may "impede the disinflation process."
"Business contacts in a number of districts had indicated that firms would attempt to pass on to consumers higher input costs arising from potential tariffs," the minutes said.
The issuance of the comments occurs amid criticism directed at the Federal Reserve from Trump, who has reproached the institution for not reducing interest rates earlier, following the decision to maintain rates during the January meeting.
The Fed minutes also revealed "elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies".
"A couple of participants remarked that, in the period ahead, it might be especially difficult to distinguish between relatively persistent changes in inflation and more temporary changes that might be associated with the introduction of new government policies," the minutes added.
The minutes from the Federal Reserve indicated the central bank's willingness to maintain interest rates in light of persistent inflation and uncertainties surrounding economic policy.
During the January meeting, the central bank opted to keep the key interest rate steady within the range of 4.25% to 4.5%, pausing after a series of reductions that occurred late in the previous year.
Jerome Powell, the chair of the Fed, has previously remarked that the bank is not "in a hurry" to implement further cuts, citing considerable uncertainty regarding the future trajectory of the economy.
Analysts anticipate that the Federal Reserve may only reduce the benchmark interest rate once in 2025, with a significant likelihood that no cuts will occur at all.
Trump's campaign included promises to lower interest rates, aiming to provide relief to borrowers.
This has ignited discussions regarding his commitment to maintaining the tradition of Federal Reserve independence, which is designed to ensure that the institution prioritizes the long-term health of the U.S. economy over political influences.
Mr. Powell has previously stated to reporters that he had "no contact" with Trump and emphasized that the Federal Reserve's decisions on interest rates are driven by data.
However, the inquiries directed at Powell concerning the Fed's response to a new directive from the White House to eliminate diversity programs, as well as its withdrawal from an international coalition of central banks addressing climate change risks to the financial system, highlight the difficulties he will encounter in keeping the institution insulated from political pressures.
Trump’s economic policies, particularly his proposed tariffs, reflect a reckless disregard for long-term stability. His willingness to pressure the Federal Reserve for lower interest rates undermines the institution’s independence, prioritizing short-term political gain over economic prudence.
His erratic leadership creates uncertainty in trade, immigration, and fiscal policy, discouraging investment and growth. Additionally, his administration’s retreat from global financial coalitions signals a dangerous isolationist stance. By pushing for policies that could fuel inflation while disregarding expert economic guidance, Trump risks damaging the very economy he claims to champion, leaving American consumers and businesses to bear the consequences.
