Overview

• Federal Reserve Governor Michael Barr called President Trump's recent tariff increases 'without modern precedent' during a speech in Iceland.
• Barr warned that the tariffs are likely to disrupt global supply chains, create persistent inflationary pressures, and slow economic growth later this year.
• Rising unemployment is another anticipated consequence, posing a dual challenge for the Federal Reserve's mandate of price stability and full employment.
• The Federal Reserve has maintained short-term borrowing costs and is taking a wait-and-see approach to monetary policy adjustments.
• Barr emphasized that the Fed is well-positioned to respond to evolving economic conditions, thanks to the pre-tariff strength of the U.S. economy and labor market.