Monetary policymakers assess the “net effects” of government policy changes, including tariffs.
Federal Reserve officials fear that rising inflation could be more sustained than expected, a summary of that March policy meeting reveals.
Participants at the joint meeting of the Federal Open Market Committee and the Federal Reserve System Board from March 18 to 19 hinted at higher core commodities inflation that could reflect “higher tariff expectations.”
Ultimately, almost all conference participants saw the reverse risks to inflation and the risks of shortcomings to employment.
The headline’s annual inflation rate is projected to slow to 2% by 2027.
The document said that authorities acknowledged that a more “cautious approach” to monetary policy makes sense as the US central bank monitors the “net effect” of government policy changes.
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Fed staff predicted that the true GDP growth at the January meeting was that “incoming data for total spending fell below expectations and support from financial position.”
The brief summary of the meeting comes just after President Donald Trump announced a 90-day suspension of mutual tariffs and a 125% collection in China.
“The minutes focused heavily on the impact of higher tariffs, and we have referenced 18 times to the impact of 18 tariffs,” wrote Jeffrey Roach, chief economist at LPL Financial in an email to the Epoch Times.
“Fed officials are concerned about downbeat sentiment for both consumers and businesses, regardless of future trade policies.
Federal government lecture
The number of financial policymakers has increased in recent weeks, and has raised concerns about the president’s tariff plans.
Authorities were working together at the beginning of the new administration, saying that it would become clearer before making policy decisions. However, many warn of the risks of inflation and benefits to economic growth resulting from higher collections.
Powell said tariffs could result in one-off price adjustments, but the central bank’s job is to ensure that “it doesn’t become an ongoing inflation problem.”
President Neil Kashkari, the federal president of Minneapolis, said he and his colleagues should leave monetary policy alone and refrain from cutting interest rates.
“Given the expectations of long-term inflation and likely to boost short-term inflation from tariffs, the bars of reduction are high even in the face of weaker economics and potentially increasing unemployment.”
In a speech at the University of Pittsburgh, Federal Reserve Governor Lisa Cook said recent developments support a restrictive policy stance to prevent the risk of revived cost pressures and unanchor’s inflation expectations.
Washington’s Federal Reserve on March 14, 2022. Stefani Reynolds/AFP via Getty Images
Ultimately, uncertainty and risks about dual-mandates should force the Fed not to change policy rates.
Core inflation, which omits volatile energy and food prices, is expected to fall from 3.1% to 3%.
The Fed held a closure meeting this week, but LPL Financial’s Lawrence Gillum says there is no signal that the Fed will intervene in market turmoil.
“There are no indications that the Fed is set to intervene, but one of its important tasks is financial stability and there is basically a bond market in free falls, so I’m sure the recent price action is attracting the Fed’s attention.”
Trump has returned to demanding that the Fed cut interest rates as inflationary pressures have fallen and the US economy has begun a tariff-driven transition.
