Tariffs Threaten to Fuel More Inflation
While February data predate recent policy shifts, looming tariffs introduced by the Trump administration are raising the inflation outlook. Fed officials remain split on their potential impact. Boston Fed’s Susan Collins flagged a likely short-term spike, whereas St. Louis Fed’s Alberto Musalem warned the effects could be more persistent, potentially lifting inflation by more than a full percentage point.
This evolving risk complicates monetary policy decisions, as PCE data may now underrepresent inflationary pressures. Markets are already adjusting expectations, pricing in a more prolonged period of elevated inflation.
