Impact of Higher Tariffs on Inflation

United States Federal Reserve Vice Chair Philip Jefferson highlighted on Wednesday the potential for higher tariffs to escalate inflation levels. However, he emphasized the uncertainty surrounding whether this effect would be temporary or have a more lasting impact.

Current Economic Indicators

"There is much uncertainty ... around the future path of inflation," Jefferson remarked during a New York Fed event. He pointed out that sustained increases in tariffs could disrupt the progress towards disinflation, possibly causing at least a temporary spike in inflation. Despite these concerns, Jefferson noted that recent inflation data aligns with the 2% target, and the labor market remains robust.

Policy Rate and Economic Vigilance

Concluding his remarks, Jefferson stated that the current policy rate is strategically positioned to adapt to evolving economic conditions. He also mentioned that the first-quarter GDP figures might have exaggerated the slowdown in economic activity, expressing his cautious monitoring for any signs of weakening in hard data.