WASHINGTON, Feb 21 — The US Federal Reserve’s battle to bring down inflation is at risk of stalling as concerns rise about the cost of tariffs, a senior bank official said Thursday.
Speaking in New York, St Louis Fed President Alberto Musalem said that he still expected inflation to “converge” around the Fed’s long-term target of two percent, “provided monetary policy remains restrictive.”
But, he added, “various changes in trade, immigration, regulatory, fiscal and energy policies, or other changes in the economic environment, could materially affect the path of the economy.”
Musalem is a voting member of the Fed’s rate-setting committee this year.
The St. Louis Fed President said he expects these changes to have only a small overall effect on the Fed’s inflation and unemployment goals, but warned that “the risks of inflation stalling above two per cent or moving higher seem skewed to the upside.”
The US central bank recently paused rate cuts, holding rates at between 4.25 and 4.50 per cent as it contends with a small uptick in inflation, and uncertainty about the future direction of economic policy under Donald Trump.
The US president has threatened to impose sweeping tariffs on allies and adversaries alike in a bid to protect domestic manufacturing and deport millions of undocumented workers — actions that many economists have criticized as inflationary.
Financial markets currently see a probability of close to 98 per cent that the Fed will vote to prolong its pause next month, according to data from CME Group. — AFP
