by Jennifer Schonberger
Yahoo! Finance
St. Louis Fed president Alberto Musalem said President Trump’s new tariffs could have a more persistent impact on inflation, a departure from Fed Chair Jerome Powell’s “base case” that any price increases could prove to be “transitory.”
“I would be wary of assuming that the impact of tariff increases on inflation will be entirely temporary,” Musalem said during a speech in Kentucky.
“The direct price-level effects [of tariffs] are expected to have only a brief and limited impact on inflation, but the indirect effects could have a more persistent impact on inflation,” he added.
The cautionary comments from the central bank policymaker come one week after the Fed held interest rates steady Wednesday for the second meeting in a row and maintained a prior prediction for two rate cuts at some point this year.