The U.S. central bank would likely have begun cutting interest rates again if not for the plan to enact higher levies on imports, the Fed chief said.
Federal Reserve Chair Jerome Powell said Tuesday that the U.S. central bank would have eased monetary policy by now if not for Donald Trump’s tariff plan.
When asked during a panel if the Fed would have lowered rates again this year had Trump not announced his controversial plan to impose higher levies on imported goods earlier this year, Powell said, “I think that’s right.”
“In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said at European Central Bank forum in Sintra, Portugal.
The tariffs directly cause prices to go up. The inflation-like effect isn't caused by too-rapid growth of currency supply, so lowering the currency supply growth rate & decoupling it from productivity growth risks stagflation . . . unless productivity growth itself is negatively impacted by tariffs, which if true would be repudiation of using tariffs alone as a strategy for growing domestic production.
unless productivity growth itself is negatively impacted by tariffs
For small to medium businesses, it very clearly was. They got hit by sudden new expenses that they could not have budgeted for and sometimes with very unreasonable payment timetables (ex. a small, US-based electronics manufacturer that I am a frequent customer of was hit with $50k out of the blue with a demand that it be paid in two weeks).