Fed's Jefferson: Expect economy to slow, future inflation uncertain due to tariffs

Howard Schneider

Wed, May 14, 2025, 6:13 AM 2 min read

By Howard Schneider

(Reuters) -Recent ostentation information constituent to continued advancement toward gathering the U.S. Federal Reserve's 2% ostentation goal, but the outlook is present uncertain owed to the anticipation caller import taxes volition thrust prices higher, Fed Vice Chair Philip Jefferson said connected Wednesday.

Consumer prices successful April roseate little than analysts expected, but "there is overmuch uncertainty...around the aboriginal way of inflation," Jefferson said successful comments prepared for transportation astatine a New York Fed event. "If the increases successful tariffs announced truthful acold are sustained, they are apt to interrupt advancement connected disinflation and make astatine slightest a impermanent emergence successful inflation.

"Whether tariffs make persistent upward unit connected ostentation volition beryllium connected however commercialized argumentation is implemented, the pass-through to user prices, the absorption of proviso chains, and the show of the economy."

Jefferson said helium supported holding the argumentation complaint of involvement dependable astatine the past Fed meeting, and felt the existent "moderately restrictive" level, successful a scope of 4.25% to 4.5%, was "well positioned to respond to developments that whitethorn arise."

Jefferson said helium regarded the labour marketplace arsenic inactive "solid," and felt that the flimsy contraction successful U.S. economical output implicit the archetypal 3 months of the twelvemonth was distorted by import information that overstated the grade to which the system was slowing.

Still, Jefferson said, sentiment among businesses and households has declined, and helium was "watching precise cautiously for signs of weakening economical enactment successful hard data."

He does expect economical maturation to dilatory implicit the year, but to stay positive.

The dependable travel of tariff announcements from the Trump administration, driving import levies to grounds heights lone to spot the astir assertive actions postponed, has near the Fed struggling to find the eventual interaction connected prices, maturation and employment.

For present policymakers accidental they are connected standby arsenic commercialized and different argumentation changes are finalized and their effect connected the system tin beryllium studied.

(Reporting by Howard Schneider; Editing by Andrea Ricci)