Impact of Tariffs on Inflation and Interest Rates

Federal Reserve Bank of Chicago President Austan Goolsbee highlighted on Friday how President Donald Trump's recent tariff announcements are influencing the inflation outlook, potentially delaying the Fed's decision to lower interest rates.

Trump's Tariff Decisions: A Double-Edged Sword

Goolsbee pointed out to the Wall Street Journal that while the pause in tariffs initially alleviated concerns and positively impacted prices, the new tariffs, including a 35% duty on Canadian goods and impending charges on EU exports, have reintroduced uncertainty. This development has led the Fed to adopt a cautious "wait-and-see" stance.

Businesses' Reaction and Future Outlook

"I'm hopeful that when we go back and talk to [businesses] now, they don't say, 'Oh, this is putting us back to where we were on April 3.' But I don't know, because this has just happened," Goolsbee remarked, emphasizing the need for increased caution in light of these new tariffs.