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Austan Goolsbee speaking at Jackson Hole on August 23, 2024. David A. Grogan | CNBC Federal Reserve officials take great pains not to comment on fiscal policy, but the looming threat from tariffs is forcing their hand. In recent days, multiple central bank policymakers not only have noted the uncertainty surrounding President Donald Trump’s desire to slap broad-ranging duties on products from Canada, Mexico and China — and perhaps the European Union — they also have highlighted the potential impact on inflation. Any indication that the tariffs are presenting longer-lasting pressure in prices could make the Fed hold interest rates higher for longer. In remarks at an auto symposium Wednesday in Detroit, Chicago Fed President Austan Goolsbee cited a number of supply chain threats that include “large tariffs and the potential for an escalating trade war.” “If we see inflation rising or progress stalling in 2025, the Fed will be in the difficult position of trying to figure out if the inflation is coming from overheating or if it’s coming from tariffs,” Goolsbee said. “That distinction will be critical for deciding when or even if the Fed should act.” Last week, the Federal Open Market Committee, of which Goolsbee is a voting member, voted to hold its benchmark interest rate steady in a range of 4.25% to 4.50% as it evaluates the evolving set of economic conditions. The vote came amid a backdrop of gamesmanship between Trump and the largest U.S. trading partners, in which he postponed levies against Canada and Mexico but added 10% in tariffs against China, which retaliated with its own measures. Economists generally see tariffs as having one-time impacts on prices, affecting particular goods where the duties are targeted but not acting as more widespread and more fundamental drivers of inflation. However, in this case Trump is…

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Filed under: News - @ February 5, 2025 10:22 pm