The minutes of the meeting released Wednesday agreed that President Donald Trump’s tariffs will have an impact to make it happen should be seen as further down inflation before rates are further reduced. did.
Policymakers for the Federal Open Market Committee have unanimously decided to stabilize the key policy rates after a total of three consecutive cuts in 2024.
When reaching the decision, members commented on potential impacts from the new administration, including tariff chatter and the impact of regulations and tax cuts. The committee said current policy is “significantly less restrictive” than before rate cuts, allowing members time to assess conditions before making additional moves.
Members said current policies “providing time to assess the evolving outlook of economic activity, labor markets and inflation, with the majority still pointing to a highly regulated policy stance. Participants say the economy is the largest employment opportunity. If they remain close, they will want to see further advances in inflation before making additional adjustments to the target range of federal fund rates.”
Officials said they are concerned about possible policy changes to maintain inflation that exceeds the Fed’s targets.
The president has already enacted some tariffs, but recently he has threatened to expand them.
In a comment to a reporter on Tuesday, Trump said he is considering a 25% mandate for automobiles, medicines and semiconductors, which will accelerate throughout the year. He didn’t dig too far into the details, but tariffs raise trade policy to another level, pose an additional threat to prices at a time when inflation has been eased but exceeds the Fed’s 2% target .
According to the meeting’s summary, “The impact of potential changes in trade and immigration policies, and strong consumer demand. Many district business contacts are expected to cause businesses to cause higher input costs to consumers. It showed that it would be a potential tariff.
They further stated that “the opposite risk to the outlook for inflation, in particular, participants cited the possible impact of potential changes in trade and immigration policies.”
Since the meeting, most central bank officials have spoken with a careful tone about where policies are heading from here. Most people will display the current level at a position where they can take their time when assessing how they progress.
In addition to the addition of general focus Fed officials to employment and inflation, Trump’s fiscal and trade policy plans added wrinkles to considerations.
Behind the worries about tariffs and inflation, the minutes said “substantial optimism about the economic outlook, partly due to expectations of government restrictions or changes in tax policy.”
Many economists expect tariffs Trump plans to launch to exacerbate inflation, but Fed policymakers say their response is one-off increase or more basic It says it will depend on whether or not it generates inflation.
Inflation indicators have been mixed recently, with consumer prices rising more than expected in January, while wholesale prices show softer pipeline pressure.
Federal Reserve Chairman Jerome Powell declined to speculate about the impact of tariffs in general. However, other officials have expressed concern and acknowledged that Trump’s move could have an impact on policy and possibly slow interest rate cuts. Currently, the next reduction is expected in July or September.
The Fed’s benchmark overnight borrowing rate is currently targeted between 4.25% and 4.5%.
