Federal Board Governor Kugler in Q&A now:
- Fed does not comment on administration policies but looks at how it will impact mandates for prices and jobs
- There may be reasons why tariffs have more prolonged effects
- Tariffs on aluminum for example effect almost every sector of the economy through supply chains, will take longer to filter through
- Rolling announcements, possible retaliation, impact on expectations could also yield a more prolonged effect on inflation
- Reallocation effects could produce more inflation if the U.S. invests in areas where it does not have a comparative advantage
- US is not in a stagflationary environment, but Fed is paying close attention to slowdown and prices
- Right now there is more upside of inflation, some signs of a slowdown in the future
- May take time for the real economy to respond to tariffs, consumers frontloading purchases could support consumption for now
This article was written by Eamonn Sheridan at www.forexlive.com.