The initial proposals of President Donald Trump fueled the concern in the Federal Reserve about increased inflationsaid monetary managers at a meeting held around a week after the inauguration of the Republican.
Participants at the Central Bank meeting held January 28 and 29 “They generally pointed to upward risks for inflation prospects”, rather than the risks for the labor market, according to the minutes published on Wednesday.
“In particular, participants cited The potential effects of possible changes in commercial and immigration policy, the possibility that geopolitical events They disturb the supply chains or an expense of households greater than expected. “
Although they continue to trust that the pressures on prices will continue to yield, “Other factors were cited that could hinder the disinflation process”according to the minutes.
As an example, the fact that “business contacts in several districts (of the FED) had indicated that companies would try to transfer consumers the greatest costs of supplies derived from possible tariffs.”
Participants also pointed out that Some measures of inflation expectationsa key concern for Fed, “They had increased recently.”
The officials agreed that they had to maintain stable interest rates until it was clear that inflation, largely stagnant since mid -2024, would reliably fall to the 2% target of the Central Bank.
Posture change
The central bankers had already changed their prospects at the December meeting to show that they expect a slower growth and higher inflation based on “assumptions of position markers” about Trump’s probable actions in their second mandate in the White House.
The president began to give details in his first days in office, including The 25% tariff proposal to Canada and Mexico, and a closure of the southern border.
The Fed maintained its reference interest rate in the range of 4.25% -4.50% at its meeting last monthand officials since then have said that they are not in a hurry to cut the types of new until they are more sure that inflation will decrease to the 2% target from the current levels around half a percentage point above that level.
Understanding the impact of Trump’s policies has become a central part of that debate.
Source: Ambito
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