Independence vital, tariffs seen as inflationary shock
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Chicago Federal Reserve (Fed) President Austan Goolsbee crossed the wires and said that economists are unanimous that the Fed must be independent from political interference. Goolsbee added that the central bank’s independence is essential “because we don’t want inflation to come back.” He added that tariffs are a stagflationary shock and said that he is “uneasy” that tariffs are a one-time shock that creates transitory inflation. Regarding future Fed meetings, Goolsbee said they’re going to be live, meaning that most Fed members would not be pre-committed about interest rates. Fed FAQs Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback. The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis. In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of…
Filed under: News - @ August 14, 2025 3:30 pm