St. Louis Fed President Alberto Musalem on warned that it’s too early to judge how deeply tariffs might affect US inflation. He projected the average effective tariff rate could land in the high teens to low 20s, but emphasized uncertainty about how the price impact will play out. “It’s too soon to tell” whether tariffs will trigger a one-time price jump or more persistent inflation, he said.
Musalem noted that Dollar depreciation could add to inflation pressures and highlighted differing reactions across businesses. Some firms may absorb the cost increases, while others are likely to pass them through to consumers depending on their profit margins and pricing power.
Despite the tariff noise, Musalem struck a generally upbeat tone on the macro backdrop. He said the economy is in a “good place,” with the labor market at or near full employment and monetary policy only “modestly restrictive.”
