The US Federal Reserve has expressed fears over the impact of President Trump’s controversial tariffs plan.
The BBC reports Minutes from a recent discussion reveal concerns over price rises for shoppers if President Donald Trump moves forward with his proposed tariffs.
Tariff Concerns and Inflation
The Fed minutes, released on Wednesday, highlighted fears tariffs could “hinder the disinflation process,” meaning they could slow the reduction of inflation.
The minutes said business contacts in various districts have reported companies may raise prices to cover higher costs caused by tariffs.
Some members are also concerned tariffs could push inflation in the wrong direction, making it harder to control.
This warning comes at a time when President Trump has criticized the Fed for not cutting interest rates sooner, after the central bank kept rates steady during its January meeting.
Uncertainty Around Economic Policies
The Fed also noted “elevated uncertainty” regarding upcoming changes in trade, immigration, fiscal, and regulatory policies.
There are concerns that the economic effects of such changes may not be fully understood yet.
- Some Fed members pointed out it will be difficult to distinguish between long-term inflation trends and short-term effects from new government policies.
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Federal Reserve’s Stance on Interest Rates
Despite ongoing inflation and economic uncertainty, the Federal Reserve is prepared to hold its interest rates steady.
In January, the central bank kept the key interest rate between 4.25% and 4.5%, pausing after several rate cuts late last year.
Fed Chair Jerome Powell has emphasized that the bank is “not in a hurry” to lower rates further, given the uncertainty surrounding the economy’s future direction.
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What’s Next for the US Economy?
- Rate Cuts in 2025: Analysts predict that the Fed might cut the benchmark interest rate once in 2025. However, there’s also a chance that no rate cuts will happen at all.
- Economic Outlook: With inflation still a concern and many unknowns in US policies, the central bank’s decisions will play a key role in shaping the economy in the coming months.
As businesses prepare for possible price hikes and the Fed keeps interest rates steady, the future of the economy remains uncertain.
Will the proposed tariffs impact consumers, or will the Fed’s cautious approach help stabilize prices? Time will tell.
