Richmond Federal Reserve Bank President Thomas Barkin said Thursday that tariffs are very likely to push inflation higher in the coming months, insisting that the central bank’s policy is now well-positioned to address the economic challenges ahead.
“I believe we will see pressure on prices,” Barkin said in a prepared speech to the New York Business Economics Association.
Speaking about tariffs and their impact on price pressures, Barkin explained that so far the tariff increases have had only a modest impact on measured inflation. However, he expects more pressure to emerge, as businesses have expressed a desire to pass on at least some of the cost of import tariffs imposed by President Donald Trump to consumers.
“However, I do not expect the impact on inflation to be as severe as what we experienced during the pandemic,” he said, adding that there are signs that consumers will shift away from tariffed goods, which could limit overall price increases.
Last week, the Federal Open Market Committee (FOMC) kept the overnight target range at 4.25% to 4.5%. The uncertainty over the economic outlook has led the Fed to take a wait-and-see approach, as tariffs are expected to increase inflation this year while reducing growth and employment.
In his remarks, Barkin acknowledged that the Fed now faces risks to both its employment and inflation mandates. However, given the uncertain outlook, he declined to comment on the direction of monetary policy going forward.
Barkin also said that the current economic environment appears strong, and recent inflation data is “encouraging”. He also noted that job growth is “healthy”.
