Inflation is expected to rise and may be persistent - - Barr

Washington (Reuters) - Federal Reserve Governor Michael Barr stated that higher import tariffs would exert upward pressure on prices, and this pressure might not be temporary. Although he described the progress made towards the 2% inflation target as 'gradual but uneven' so far, his remarks indicate he is not in a hurry to cut interest rates.

Barr said in his opening remarks at an event in Omaha, Nebraska: 'Tariffs are expected to lead to rising inflation. Higher short-term inflation expectations, supply chain adjustments, and second-round effects may impart a degree of persistence to inflation.' This event aimed to gather feedback from business and community leaders on Federal Reserve policy and interpretations of the current economic situation.

He added that, meanwhile, tariffs could weigh on the economy and push up the unemployment rate - which is currently low and stable, with an unemployment rate of 4.2% in May.

Barr stated: 'There is still considerable uncertainty regarding tariff policy and its effects. Monetary policy is in a favorable position, allowing us to wait and observe how economic conditions evolve.'

The Federal Reserve maintained the short-term borrowing rate in the range of 4.25%-4.50% last week. Federal Reserve Chairman Jerome Powell emphasized earlier on Tuesday during testimony before Congress that the central bank is taking a 'wait-and-see' approach to interest rate setting while assessing the impact of tariffs on inflation over the coming months.

Barr's comments differ from those of Federal Reserve Governors Christopher Waller and Vice Chair for Supervision Michelle Bowman. Both have recently indicated that, given their belief that tariffs may only have a one-time impact on inflation, a rate cut may be possible in July.

Barr noted: 'Monetary policy sometimes requires trade-offs - for example, the policy stance needed to reduce inflation may also reduce aggregate demand and slow economic growth.'

'Balancing our economic goals hinges on determining how policy decisions affect households and businesses, which is why we are here to listen to your opinions.'

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