GuShiio.com ① New York Fed President Williams predicts that Trump’s tariff increase will lead to worsening U.S. inflation, but the impact is uncertain;
② Williams believes that the current monetary policy is in good shape and there is no need to adjust interest rates immediately. It is expected that inflation will move closer to the 2% target;
③ Tariffs have caused investors to worry about economic growth prospects, and the market expects the Federal Reserve to cut interest rates three times this year.
Financial Union, March 5 (Editor Niu Zhanlin)On Tuesday local time, New York Fed President Williams said he expected Trump’s additional tariffs to worsen the inflation situation in the United States, but there was still great uncertainty about the impact of the tariffs.
At an investment conference that day, Williams said: “Based on what we know so far, and given all the uncertainty, I pay close attention to some of the impact of tariffs on inflation and prices, and I think we will see those effects later this year.”
He pointed out that the impact of tariffs on economic activities needs to be considered, especially on corporate investment and consumer consumption behavior. “And I think that’s another huge uncertainty.”
When asked if policymakers would consider adjusting interest rates at this month’s meeting, Williams said monetary policy is in good shape and there is no need to adjust borrowing costs immediately. He described interest rate policy as “moderately restrictive” and said he expected inflation to move closer to the central bank’s 2% target over time.
Federal Reserve policymakers left borrowing costs unchanged in January this year after cutting benchmark interest rates by 100 basis points late last year. Officials say they want to keep interest rates stable until they see more evidence that inflation is on track to reach 2%.
Regarding economic growth, Williams said he expected U.S. growth to be good this year, albeit slower than last year.
Since this week, investors have become increasingly worried about economic growth prospects due to Trump’s tariffs on China, Mexico and Canada, causing global stock markets to plummet.
The latest data from the Atlanta Fed’s GDPNow forecast shows that U.S. GDP growth in the first quarter may be-2.8%, which has exacerbated investor anxiety.
“The immediate response to market prices shows how uncertain the general view is on all tariff-related issues,” said Jordan Rizzuto, chief investment officer at GammaRoad Capital Partners.
Rizzuto said that recently, concerns that the U.S. economy may be sliding towards “stagflation” have exacerbated market difficulties. “Stagflation” is characterized by slow or negative economic growth and high inflation.
As concerns about the impact of U.S. tariffs on global economic growth have been raised, traders have increased their bets on the Federal Reserve’s interest rate cuts this year and now expect three 25 basis point rate cuts this year, the first time since mid-December last year.
The escalating trade war, coupled with data showing weakness at the beginning of the year, has raised concerns that officials may soon face an environment of slowing growth and above-target inflation, which will force policymakers to make tough decisions between jobs and price stability.
