One Fed official noted that businesses expect to pass on costs from higher tariffs to consumers, who will face higher prices.
A trio of Federal Reserve officials said Thursday that while they still think inflation will cool over time to pave the way for more interest rate cuts as the most likely scenario, uncertainty surrounding President Donald Trump's trade, immigration and other policies could lead to a different outcome.
Atlanta Fed President Raphael Bostic said that his "baseline expectation" is that central bank policymakers will be able to proceed with two 25 basis point cuts later this year, but "the uncertainty around that is pretty significant… There's a lot that could happen that could influence that in both directions."
Bostic isn't a voting member of the Federal Reserve's monetary policy-setting committee this year but told reporters he didn't think the U.S. economy is facing a new burst of inflation and noted that with the unemployment rate at 4%, the labor market is healthy.
However, he added there is both enthusiasm and "widespread apprehension" among businesses about how new import taxes, immigration rules and regulatory changes will impact the economic outlook.
President Trump has issued several tariff threats against key trading partners like China, Canada and Mexico since taking office, as well as on imported automobiles, pharmaceuticals and semiconductors.