Fed Weighs Tariff Impact Amid Inflation, Economic Risks

President Donald Trump's continuation and expansion of tariffs, including a new round targeting several countries, has heightened uncertainty for the Federal Reserve as it navigates its monetary policy decisions. Fed Chair Jerome Powell has emphasized a cautious approach, preferring to wait for clearer evidence of tariffs' inflationary impact before cutting interest rates, despite pressure from President Trump for quicker action. The trade tensions contribute to risks of stagflation, with inflation potentially rising amid slower economic growth, complicating the Fed's balancing act. Market expectations for rate cuts have moderated recently, reflecting concerns about tariffs' effects on corporate profits and economic growth. Additionally, the Federal Reserve is concerned about the long-term fiscal impact of President Trump’s new bill, which could increase the national debt significantly and complicate future borrowing. Overall, the Fed remains vigilant as it assesses the evolving trade environment and its implications for inflation and economic stability.