Fed’s Alberto Musalem forecasts negative impact of tariffs on US economy

Alberto Musalem, President of the Federal Reserve Bank of St. Louis, warns tariffs may pressure the US economy and labor market. As the official stated, even after the easing of tensions on May 12, tariffs can significantly affect the near-term economic outlook. Earlier this month, the United States and China agreed to mutually reduce tariffs for 90 days to continue trade negotiations.

The Federal Reserve (Fed) can respond in a balanced way to changes in inflation and employment while keeping Americans' expectations of price increases near its 2% target, the official said. The Fed interest rate has remained unchanged this year as the regulator awaits the economy's response to new measures in trade, regulation, taxes, and immigration.

If negotiations succeed and tariffs are further reduced, the US economy could maintain its current trajectory, and inflation would continue to fall to the target level, according to Musalem’s statements quoted by Bloomberg.

Moreover, according to the official, if the country's inflation rate rises, the Fed can provide the necessary support to the labor market. However, he noted that such a decision may be associated with risks.