Fed’s Kugler says higher than expected tariffs likely to send prices higher

Federal Reserve Governor Kugler on transmission of monetary policy

• Tariff increases significantly larger than previously expected

• Economic effects of tariffs and uncertainty likely to be larger than anticipated

• Supports holding policy rate steady as long as upside risks to inflation continue, while economic activity and employment remain stable

• Fed policy well-positioned for macroeconomic changes

• If financial markets tighten persistently, could weigh on future growth

• Especially monitoring upside risks on inflation, downside risks on employment

• Inflation progress has slowed, remains above 2% goal

• Labor market solid, broadly in balance

• Longer-term inflation expectations largely well-anchored, hopes they remain so

• First-quarter GDP may show moderation vs 2024, but some front-loading of purchases to avoid tariffs

• Tariffs likely to put upward pressure on prices

Kugler’s speech appears to have been prepared before Trump’s latest flip flop on policy:

• Trump backing away from tariffs, backing away from firing Powell – will it last?
• Trump says he has no plans to Fire Federal Reserve Chair Powell
• Trump says he is going to be very nice to China, they have to make a deal

This article was written by Eamonn Sheridan at www.forexlive.com.