Uncertainty about President Donald Trump’s tariffs are complicating the ‘data dependent’ US Federal Reserve’s efforts to send a clear message about the direction of the economy, economists say.
As the Fed prepares to deliver its latest interest rate decision on Wednesday, figures last week showed inflation slowed more than expected in February, bolstering the case to resume cuts later this year amid signs of slowing growth. However, policymakers are also weighing fears that promised trade tariffs could stoke inflation or trigger an economic slowdown — or both.
“The promise of future tariffs essentially pushes aside [the Fed’s] goal of data dependency and means they’re going to have to rely more on a forecast framework,” said Joe Brusuelas, chief economist at tax and consulting firm RSM US.