FT News Briefing
Swamp Notes: The Federal Reserve’s tariff dilemma
Apr 12, 2025
Chris Giles, an economics commentator for the Financial Times, and Claire Jones, the incoming U.S. economics editor, tackle the Federal Reserve’s tightrope walk amidst President Trump's trade wars. They dissect how tariffs create inflationary pressures even as consumer prices dropped. The discussion focuses on Chair Jay Powell’s tough choices: prioritize economic growth or keep inflation in check. They also highlight the broader impacts of these decisions on everyday Americans and the Fed's cautious approach to interventions.
17:49
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Quick takeaways
- The Federal Reserve faces a dilemma of maintaining price stability while responding to President Trump's pressure for interest rate cuts amid inflation concerns.
- Investors are apprehensive due to market volatility caused by tariffs, which could undermine the benefits of declining inflation and hinder economic growth.
Deep dives
Inflation Trends and Fed Decision-Making
The consumer price index in the U.S. has recently dropped to 2.4%, which has pleased some, including President Trump, who is advocating for interest rate cuts. Despite this favorable inflation figure, concerns about the stickiness of inflation remain, particularly due to tariffs affecting import prices. The Federal Reserve is faced with the challenge of balancing its dual mandate of price stability and maximum employment, which will influence its decision on interest rates. As the economic landscape evolves, the Fed's hesitance stems from potential cost shocks and second-round effects driven by tariffs rather than a straightforward approach to lowering rates.
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