US Fed details plans for tariff turmoil

As President Donald Trump’s trade policy has started to take shape, officials at the Federal Reserve have been more vocal about the shock sweeping throughswathes of the economy.

- COLBY SMITH

In a recent speech, Jerome Powell, the chair of the central bank, warned that levies of the scope and scale Trump is pursuing would “most likely lead to both higher inflation and slower growth than initially expected — the makingsof what’s known as a stagflationary shock.

Mr Powell expanded on those remarks Wednesday, laying out in greater detail how the Fed would deal with a situation in which its calls for a healthy labour market as well as low and stable inflation clashed with one another.

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Mr Powell said in a speech at the Economic Club of Chicago. “If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”

The recent whitewash over which products are subject to tariffs, by how much and for how long, has stoked extreme uncertainty about the economic outlook, leading to diverging views about when the central bank may be able to cut interest rates again.

HIGH BAR FOR CUTS