Tariffs to Fuel Inflation, Fed Signals ‘Wait and Watch’‌ on Rate⁣ Cuts

Washington D.C. – The‌ specter of rising​ inflation looms as tariffs⁣ are poised to ​significantly⁣ impact prices in the coming months, according to⁢ Federal ⁣Reserve Chair Jerome powell. Speaking on the economic‌ implications of trade policies, Powell indicated that the burden of these tariffs will inevitably be absorbed by various players within the supply chain, ultimately reaching the end consumer.”someone has to pay‍ for the tariffs,” Powell stated, emphasizing that the⁣ cost will be distributed across the chain,⁤ from manufacturers and exporters to importers and retailers. He elaborated,‌ “It will be someone in that chain ‌that I mentioned, between the manufacturer, the exporter,​ the importer, the retailer, ultimately somebody putting it into a good of some kind or ​just the consumer buying ​it.”

Powell ‍cautioned that U.S. consumers will bear a portion⁤ of this increased ⁢cost. “All through that chain, people will ⁢be trying ⁢not to be the ones⁤ who can take up the cost, but‌ ultimately, the cost of the tariff has to be paid. And some of it will fall on the end consumer.” This suggests ⁣a potential headwind for household budgets as the price of imported⁢ goods, or goods reliant ⁢on imported components, could see an uptick.

Fed Has Played the ‘wait⁤ and Watch Game’

In⁢ parallel with his ⁢remarks ⁤on tariffs, ⁤Powell reiterated the ‌Federal Reserve‘s ‌current stance on monetary policy, signaling ‍a “wait and watch” approach regarding future interest rate adjustments. He effectively dismissed the immediate prospect of rate cuts, citing the robust health of the U.S. economy.

“The economy seems to be in solid shape, so the ⁤labor⁣ market is not crying out for a ⁣rate cut,” Powell asserted. This sentiment was echoed in⁤ his recent testimony before ⁢the House Financial services Committee, where he stated, “for the time being, we are well-positioned to wait to learn more about the likely course⁣ of the economy before considering any⁤ adjustments to our policy stance.”

The Fed’s primary objective, as‍ outlined by Powell, is to maintain stable long-term⁤ inflation expectations and prevent temporary price shocks from escalating into persistent inflationary pressures.”The FOMC’s obligation is to keep longer-term inflation expectations well‍ anchored⁤ and to prevent a one-time increase in the price level ⁢from⁤ becoming an ongoing inflation problem,” he ⁣explained.

Market sentiment aligns with the Fed’s cautious approach.‌ Current data from the CME FedWatch tool indicates‌ a strong consensus among ​traders, with approximately 95.9% anticipating no change in interest rates at the‌ upcoming July meeting. This suggests that the market is factoring in the Fed’s patient strategy as it navigates the evolving economic landscape, including the potential inflationary impact of⁤ tariffs.***

About ‍Mohit PRO‍ INVESTOR

Mohit Oberoi is ‌a​ freelance finance⁤ writer based in india. He has completed his MBA in finance as a major. He has‍ over‌ 15 years of experience in financial markets. He⁤ has ⁣been writing extensively on global markets for the last eight ‍years and has written⁢ over 7,500 articles. He covers metals, electric vehicles,⁤ asset managers, tech stocks, and other ‍macroeconomic news. he also loves writing on personal finance ⁣and topics related to valuation.