Fed's Barr shares Powell’s fears of accelerating US inflation due to Trump’s tariffs

Federal Reserve Governor Michael Barr aligns with Chair Jerome Powell’s concerns about inflation, anticipating that it could accelerate due to Donald Trump’s proposed import tariffs. As a result, the Fed’s monetary policy decisions must be made more carefully. Risks of rising consumer prices—which are gradually, albeit unevenly, approaching the regulator’s 2% target—are preventing the central bank from further rate cuts, Reuters reports.

However, inflation isn’t the Fed’s only concern. Barr warns that Donald Trump’s trade policies could slow US GDP growth or tighten the labor market.

At the Fed’s June meeting, interest rates were held steady in the range of 4.25–4.50%. The Fed Chair intends to maintain this wait-and-see approach until the economic impact of new US import tariffs becomes clearer.

Fed officials are divided on the issue. While Barr supports Powell’s cautious stance, others, like Christopher Waller and Michelle Bowman, are pushing for rate cuts as early as July, Reuters reports.