Fed Governor Michael Barr said overnight that tariffs may pose a dual threat to the economy—lifting inflation expectations while simultaneously slowing growth. He pointed to survey data showing households anticipate sharp near-term price increases, which, coupled with supply chain reconfiguration and second round effects effects, could result in “some inflation persistence.”
At the same time, Barr acknowledged tariffs could cause the economy to slow and unemployment to rise,” disproportionately impacting low-income workers.
Given these uncertainties, Barr advocated for a patient policy approach. “Monetary policy is well positioned to allow us to wait and see how economic conditions unfold,” he said.
