On February 3, 2025, the flag outside of Fair Montroyal York in downtown Toronto.
Andrew Francis Wallace | Toronto Star | Getty Image
A complex scenario surrounding a tariff drama that may put the federal preparation system in an unpleasant catch 22 has appeared. I don’t know if I use the policy lever to keep inflation or to boost my growth.
In the efforts of President Donald Trump for President Donald Trump to use as a tool for both foreign and economic policy, the central bank will balance a delicate balance to strike.
Many economists expect tariffs to raise prices and reduce the pace of gross domestic production, and the main problem is the extent of the need for Fed’s policy adjustment.
“Probably, you may be offset by the price shock, maybe it is offset by rising dollars than the national currency, but the long -term impact is actually negative for growth. There is a tendency for Charles Schwab. “You put the combination together and put the Fed in the real bind.”
There are many movable portions in which Trump is taking place in China, Canada and Mexico. As things are now, the intimidation obligations of Canada and Mexico have been postponed for the president to negotiate with the government leaders. However, the situation with China immediately escalated a fierce conflict with the market.
Another history
Although historical records are low in certainty, it is essentially a religious article for economists to cause higher tariffs. For example, the SMOOT-HAWLEY tariff in 1930 was proved to be deflation, helping to worsen the great PRESSION.
When Trump started tariffs in his first term, the inflation rate was low, and the Fed was raising the price in search of the “neutral” level. The manufacturing industry continued in 2019, but did not spread in a wider economy.
This time, the target tariffs that Trump used earlier was replaced by a comprehensive duty that could change monetary policy calculations. SCHWAB predicts that 0.7 % may be added to core inflation while reducing the GDP growth rate of 1.2 % by all power, and that it may be 3 % higher than the latter scale in the future.
Jones said that the larger tariffs would affect prices and increase their growth in the future, “said Jones. “So, I was able to see that it has been held for a long time (Fed). The tariff threats are hanging around the market, and these prices have risen, and the second half of the year, or next year, or or next year. It must be relieved. “
“But they are definitely two -way coins,” she added.
In fact, the market is seeking the impact of the full four -month interest reduction in interest rate reductions in 2024, and the FRB will be at least for the next few months to observe the reality of the tariffs of tariffs. We are looking forward to the strict maintenance at least for the next few months. 。
If any of the parties blink or have less inflation than they are considered, the Fed can focus on the employment aspects of its dual missions and move away from inflation concerns.
“They are currently very comfortable, and they don’t even know what they look like, so the round -trip of tariffs does not affect it.” “You talked many months ago before this has a meaningful impact on their thoughts.”
“Many uncertainty”
Wingrad has a possibility that customs duties can increase the price by one, but one of the people who believes that Fed authorities do not create fundamental inflation as they see when making policies. is.
This matches some of the recent statements from Fed staff. They say they are likely to affect decision -making only if tariffs create a full -fledged trade war or contribute to a more basic or demand driver.
“There is a lot of uncertainty about how the policy is deployed, and it is very accurate to the possibility of the impact without knowing what the actual policy is implemented. Is really impossible. “Monday interview. From a policy perspective, Collins said that the current stance was “patient, paying attention, and there is no urgency to make additional adjustments.”
Market prices are still the possibility of reducing the Fed rate reduction in the June meeting, probably showing another quarter of December. Fed last week, the Fed chose to stabilize the Federal Fund rate in a range of 4.25 % to 4.5 %.
According to Wingrad, the Fed is looking at a scenario that can be cut a couple of times this year, but does not start later due to tariff status.
“I don’t think the US economy is generally insulated from trade friction, which doesn’t seem to move the Fed’s needle too much,” said Winograph. “The market is too mechanical of the Fed’s reaction function because it needs to respond to it when inflation rises.
