Federal Reserve Governor Adriana Kugler believes the tariff impact on the US economy could be more significant than previously estimated. During a recent speech at the University of Minnesota, Kugler highlighted growing concerns about how these trade measures might affect prices and economic stability.
Fed’s Kugler’s remarks on the tariff impact
Federal Reserve Governor Adriana Kugler warned Tuesday that the tariff’s impact on consumer prices will likely be stronger than initially projected. “This month, we learned that the tariff increases are significantly larger than previously expected,” Kugler stated during her Minneapolis address. “As a result, the economic effects of tariffs and the associated uncertainty are also likely to be larger than anticipated.”
The tariff impact concerns stem from President Donald Trump’s recent announcement of sweeping duties on US trading partners, including tariffs exceeding 100% on Chinese goods. Economic analysts broadly anticipate these measures will create upward pressure on inflation while simultaneously constraining economic growth.
Despite acknowledging heightened economic uncertainty, Kugler emphasized that the Federal Reserve remains committed to its policy approach. “The economy is facing heightened uncertainty, with upside risks to inflation and downside risks to employment,” she noted.
When questioned about market volatility following the tariff announcements, Kugler clarified that the tariff impact, not Federal Reserve policy, was creating market uncertainty. “The uncertainty is not coming from us,” she asserted during the post-speech Q&A session.
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Fed’s Kugler’s realistic perspective on the tariff impact
Kugler’s speech emphasized the importance of comprehensive economic monitoring to gauge the full tariff impact on various sectors. She stressed that monetary policymakers must “broadly examine all available information, including market-based measures, surveys, and anecdotal reports” to understand economic developments as early as possible.
Kugler reiterated her support for maintaining current borrowing costs until inflation risks diminish, provided economic activity and employment levels remain stable. Her speech focused extensively on monetary policy transmission mechanisms, highlighting the time lags inherent in Federal Reserve actions affecting the broader economy.
These comments underscore the Federal Reserve’s challenging position as it navigates potential tariff-induced inflation while working to maintain employment stability in an increasingly uncertain economic environment.
As businesses and consumers prepare for potential price increases and supply chain disruptions, the Federal Reserve continues to monitor the expanding tariff impact while balancing its dual mandate of price stability and maximum employment.
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