Jeff Schmid, President of the Federal Reserve Bank of Kansas City, emphasized the need for flexibility when assessing the impact of tariffs on the economy. In a speech prepared for an event in Kansas City on Thursday, Schmid noted that while tariffs may push up prices, the extent of this impact is uncertain and may not fully manifest for some time.
Similarly, the extent of the drag on economic growth and employment remains unclear.
Current Economic Outlook
Schmid acknowledged that the economy remains strong and is close to the Federal Reserve’s dual goals of maximum employment and price stability. However, he described the outlook as “very uncertain,” highlighting the need for policymakers to remain adaptable in the face of evolving economic conditions.
Interest Rate Policy
The Federal Reserve has kept interest rates unchanged so far this year, and it is widely expected that the upcoming policy meeting on June 17 – 18 will also not adjust interest rates. Fed officials are waiting to see how the trade and other policies of the Trump administration will affect the economy. This cautious approach reflects the uncertainty surrounding the impact of tariffs and other external factors on economic growth and inflation.
Conclusion
Jeff Schmid’s remarks underscore the importance of maintaining flexibility in economic policy, particularly in the context of tariffs and their uncertain impact on prices, growth, and employment. As the Federal Reserve awaits further clarity on the effects of trade policies, maintaining a steady interest rate stance allows for a more measured response to potential economic shifts.
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