"Uncertainty in the U.S. Economy Grows Due to Tariffs"
Fed Officials Urge Caution on Further Rate Cuts Amid Rising Inflation Risks
Key officials of the U.S. Federal Reserve (Fed) on the 3rd (local time) consecutively expressed the need to be more cautious about further interest rate cuts.
According to Bloomberg News, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, emphasized in an interview with American Public Media's Marketplace program that "we need to be more careful and cautious about how quickly we can lower interest rates because there is a risk of inflation rising again."
President Goolsbee said that understanding the impact of tariffs would not be simple. He stated, "It will become increasingly difficult to distinguish between signs of an overheating economy, temporary phenomena caused by the intensification of the trade war, or results due to geopolitical factors," adding, "We are trying to identify what the consistent trend running through everything is. When uncertainty is too high, we may need to slow down the pace of reaching consensus." He also added, "These concerns stem from conversations with businesspeople."
Raphael Bostic, President of the Federal Reserve Bank of Atlanta, also said that due to increased uncertainty in the U.S. economy, it is necessary to wait 'a while' before cutting interest rates again. At an event hosted by the Atlanta Rotary Club, President Bostic said, "I want to see how the 100 basis points (1bp = 0.01 percentage point) interest rate cut made last year affects the economy," adding, "Depending on the indicators, we may need to wait a while."
President Bostic said, "There was uncertainty last year as well, but now the uncertainty is greater than it was then," and added, "I do not expect to obtain clear information about the inflation path at the Fed's policy decision meeting next month."
Regarding tariffs, President Bostic said, "Whether tariffs become a major driver of policy decisions may vary depending on the situation," and added, "If tariffs affect inflation expectations, we will have to respond policy-wise in some way."
Susan Collins, President of the Federal Reserve Bank of Boston, pointed out that the Fed is unlikely to react to the impact of tariffs on prices unless it sees higher and more persistent signals of inflation. In an interview with CNBC on the same day, President Collins said, "The Fed will try to look at the price increases caused by tariffs."
President Collins diagnosed that while broad-based universal tariffs, as announced in recent days, could potentially affect prices, it is difficult to accurately predict the extent of the impact since exact policies have not yet been established. She reiterated her view that policymakers should remain patient, especially in a labor market close to full employment.
He predicted, "There is no need to rush additional interest rate cuts," adding, "The data will tell us. At some point, there will definitely be further normalization from a policy perspective."
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