[Global Network Finance Comprehensive Report] On Monday local time, Federal Reserve Governor Kugler made a statement pointing out that the tariff policy of the Trump administration may still push up inflation and drag down economic growth even after the easing of tensions in Sino-U.S. trade.
Kugler stated that the current average tariff rate in the United States is still far higher than it has been for decades, and if the status quo is maintained, the economic impact will be similar, namely higher inflation and slower economic growth.
Last week, Federal Reserve policymakers kept the benchmark interest rate unchanged for the third consecutive meeting. Kugler expressed support for this decision, stating that considering the upward risks of inflation and the restrictive nature of the Federal Reserve's policy stance on the economy, the decision is reasonable. She said she will closely monitor the future trends of inflation and employment, believing that the current monetary policy stance is prepared for changes in the macroeconomic environment.
Kugler expects tariffs to pose a negative supply shock, leading to weakened economic growth and consumer demand as prices rise, and may also have a 'significant impact' on production efficiency. Companies may cut back on investment and take inefficient measures in response, while a decline in overall demand may make it harder for job seekers to find work. She believes that the downward pressure on inflation from the decline in overall demand may not be enough to offset the negative effects of the supply shock.
Kugler stated that the employment situation in the United States is 'basically stable', but the progress in reducing inflation has slowed since last summer. She mentioned survey data and indicators such as the Federal Reserve's Beige Book, indicating that tariffs have affected consumer and business behavior, sentiment, and expectations. She also pointed out that the decrease in U.S. economic output in the first quarter was due to a historic surge in imports, while domestic consumption growth may have been impacted by households and businesses hastily trying to avoid taxes, which could pose hidden risks for future consumption decline. (Chen Shiyi)
