Fed’s Thomas Barkin says tariffs will push up inflation

Federal Reserve Bank of Richmond President Thomas Barkin stated that tariffs are likely to increase inflation in the coming months. Barkin made these remarks at a gathering of the New York Association for Business Economics, where he noted that while tariffs have had a modest effect on inflation so far, he anticipates more pressure in the future. Businesses have commented that they expect to pass on some of the increased import taxes to consumers, which could lead to higher inflation. However, Barkin does not expect the impact on inflation to be as significant as it was during the pandemic, and consumers may try to avoid tariffed goods to limit price increases. The Federal Reserve's most recent meeting saw officials leave interest rates unchanged, and the central bank is currently facing risks on both its job and inflation mandates. Barkin declined to comment on the direction of monetary policy, citing uncertainty in the outlook, but noted that policymakers should consider all possible scenarios. Some Fed officials believe that tariffs will lead to a one-time price increase and are open to cutting interest rates at the late July meeting, while futures markets predict a rate cut at the September meeting. Barkin emphasized the importance of patience and allowing visibility to improve before making any decisions on interest rate policy. He also noted that the current state of the economy is strong, with healthy job growth and encouraging recent inflation data. Overall, Barkin believes that the Fed is well-positioned to address any future economic developments, and that hiking rates to contain price pressures is not currently a priority.