Fed Worries Trade War Could Bring Persistent Inflation

Federal Reserve officials are concerned that fallout from President Trump’s tariff policy could lead to more persistent inflation, according to minutes from the central bank’s March policy meeting—held before the announcement of sweeping tariffs and prior to the 90-day pause on the most severe measures, Nicole Goodkind and Janet H. Cho reported for Barron’s Daily.

The Fed left the federal funds rate unchanged at a target range of 4.25%–4.50%.

The word “tariffs” appeared 18 times in the March meeting minutes, compared with just once in January’s. A majority of participants noted that inflationary risks could prove “more persistent than projected.”

Officials also cited tightening financial conditions and heightened market volatility, warning that “an abrupt repricing of risk in financial markets could exacerbate the effects of any negative shocks to the economy.”

The Fed left the federal funds rate unchanged at a target range of 4.25%–4.50%.

There was some disagreement among officials about the economic outlook. Several noted that the planned tariff increases were “larger and broader” than expected and questioned whether inflationary pressures could be offset by other economic factors, such as depleted household savings or stricter immigration policies.

Fed Chair Jerome Powell struck a hawkish tone in his April 4 speech, warning: “We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation.”

Many economists are forecasting a recession later this year.