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Trump to Expand Tariffs as Fed Warns of Inflation Risks

Federal Reserve officials caution that new tariffs, set to be announced April 2, could exacerbate inflation and complicate monetary policy as economic confidence wanes.

Neel Kashkari, President and CEO, Federal Reserve Bank of Minneapolis, speaks at the Milken Conference 2024 Global Conference Sessions at The Beverly Hilton in Beverly Hills, California, U.S., May 7, 2024. REUTERS/David Swanson/File Photo
Alberto Musalem, President and CEO of the Federal Reserve Bank of St. Louis, speaks to the Economic Club of New York, in New York City, U.S., February 20, 2025. REUTERS/Brendan McDermid/File Photo
St. Louis Fed President Alberto Musalem is a voting member of the US central bank's rate-setting committee this year

Overview

  • President Trump plans to announce additional tariffs on the automotive sector and other trading partners on April 2, raising concerns about further economic disruption.
  • Federal Reserve officials, including St. Louis Fed President Alberto Musalem, estimate that announced tariffs could increase inflation by up to 1.2 percentage points if fully implemented.
  • The Federal Reserve is maintaining its current interest rate range of 4.25%-4.5%, citing economic uncertainty and inflationary pressures tied to tariffs.
  • Economic confidence among households and businesses has declined significantly, with fears of higher prices and market instability dampening spending and investment.
  • Fed officials warn that the inflationary effects of tariffs may not be temporary, with indirect impacts potentially requiring prolonged restrictive monetary policy.