Federal Reserve Messenger: Tariffs become a key factor in whether and when the Fed will resume interest rate cuts

According to a report by Golden Finance, Nick Timiraos, the voice of the Federal Reserve, wrote that as Trump considers using tariffs more boldly, a key question looms over the Fed: to what extent will any price increase stimulate public expectations of higher inflation rates? When or whether the Federal Reserve resumes interest rate cuts largely depends on the inflation outlook, and this year's inflation outlook may depend on whether Trump fulfills his threat to raise tariffs. During Trump's first presidency, the trade war escalated and the Federal Reserve lowered interest rates in 2019. The Federal Reserve is concerned that the impact of the trade war on business sentiment and investment may outweigh the potential impact of price increases caused by tariffs. At that time, tariffs did not cause inflation in terms of their impact on economic activity because it was not an inflationary period, "said Steven Cumming, who was then the head of the Federal Reserve's international finance department and now works at the American Enterprise Institute. The Federal Reserve may react differently this time after the tariff hike takes effect, as the United States has just experienced a period of high inflation. He expects that the Federal Reserve will indeed be more inclined to oppose the imposition of tariffs in this round than in the previous round, and if the policy of imposing tariffs is implemented, the Federal Reserve will maintain interest rates at a higher level than before.