3 April 2025 | Dollar

New US import duties make it more difficult for Fed to decide on interest rates

New US import duties make it more difficult for Fed to decide on interest rates

According to economists interviewed by Bloomberg, a new package of aggressive tariffs on US imports will significantly complicate the work of the Federal Reserve (Fed) as it tries to curb inflation and avoid economic slowdown.

Donald Trump's trade restrictions announced yesterday were much harsher than many experts anticipated. Bloomberg Economics analysts estimate that the new duties could raise the average effective tariff rate in the US to about 22% from 2.3% in 2024.

As KPMG chief economist Diane Swank noted, the tariffs increase the likelihood of a slowdown in US GDP growth, being, in fact, the worst-case scenario envisioned by the company's experts.

Experts interviewed by the agency, including Swank, Jay Bryson of Wells Fargo, Joseph Brusuelas of RSM US and others, believe Fed officials are likely to refrain from cutting rates for now to assess the impact of tariffs on inflation in detail.

Meanwhile, according to a University of Michigan survey, in March, US consumers' inflation expectations for the next five to 10 years rose to the highest level in more than three decades. At the same time, outlooks regarding personal finances declined to a record low.

Elena Dorokhina MarketCheese
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