Fed Officials Express Growing Unease Over Trump's Tariff Impact on Inflation

Federal Reserve officials are increasingly vocal about their concerns over the potential inflationary impact of President Donald Trump's tariffs, CNBC reports. While the Fed typically avoids commenting on fiscal policy, the scale and breadth of the tariffs have prompted central bankers to highlight the potential risks.

Speaking at an auto symposium in Detroit, Chicago Fed President Austan Goolsbee cited “large tariffs and the potential for an escalating trade war” as major supply chain threats. He warned that if inflation rises or economic progress stalls in 2025, the Fed will face the difficult task of discerning whether the cause is overheating or tariffs.

“That distinction will be critical for deciding when or even if the Fed should act,” Goolsbee emphasized.

This concern is echoed by other Fed officials, who are closely monitoring the potential for tariffs to create more widespread and lasting inflationary pressures.

In an interview with CNBC, Boston Fed President Susan Collins, also an FOMC voter, highlighted the unusual nature of the broad tariffs.

“We have limited experience of such large and very broad-based tariffs,” Collins noted. “There are many different dimensions, and there are second-round effects as well, which make it particularly hard to really assess what the amounts would be... We don’t know what the time frame would be that would cause a rise in a price level.”

Collins acknowledged that if the tariffs are short-lived, the Fed might be able to “look through” their impact. However, she stressed that the underlying trends in inflation will heavily influence the Fed’s policy decisions.

Other Fed officials, including Philadelphia President Patrick Harker and Atlanta Fed President Raphael Bostic, have also expressed concerns about the potential for tariffs to fuel inflation. They, too, are closely watching for any signs of longer-term impacts.

In contrast, Fed Chair Jerome Powell, during his post-meeting news conference last week, deflected multiple questions about tariffs. He argued that it is too early to assess the potential economic implications of fiscal policies, including tariffs.

“We don’t know what will happen with tariffs, with immigration, with fiscal policy, and with regulatory policy,” Powell stated. “I think we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”