Economists and buyers will likely be looking out for clues on how the Federal Reserve is considering the Trump administration’s goals, notably plans to impose tariffs on US imports.
“To me, tariffs actually are the wild card for macroeconomic coverage this yr,” mentioned Claudia Sahm, chief economist at New Century Advisors and a former Fed official. “It feels prefer it’s simply outweighing all the things else at this level.”
The Fed has confronted world commerce wars earlier than — together with throughout Donald Trump’s first time period in workplace. Nonetheless, at that time neither worth pressures nor combination demand had been as sturdy as now. This time round, the danger is that the impression on inflation is extra pronounced — and extra enduring.
A definitive response from Fed chair Jay Powell on the impression of tariffs on rates of interest as quickly as right this moment is unlikely.
Powell mentioned after the central financial institution’s December vote that there have been “many, many components” figuring out how levies on US imports would have an effect on shopper costs, and that central bankers would “take our time” and never rush to conclusions.
Some economic system watchers anticipated govt orders on day one among Trump’s second time period. However at this stage it’s nonetheless unclear how powerful the US president and self-described “tariff man” will likely be on the US’s commerce companions: commerce restrictions might represent a one-off shock, or show a gradual burn, getting steeper by the month — as desired by Treasury secretary Scott Bessent. Each paths have implications for the knock-on impression on shopper costs.
