Fed's Goolsbee: New tariffs are certainly less stagflationary than previous path
|Federal Reserve (Fed) Bank of Chicago President Austan Goolsbee took a cautionary stance on the ever-evolving trade stance of the Trump administration on Monday. According to Goolsbee's interview with The New York Times, constantly-changing tariffs and trade strategies from the White House have thrown a very large wrench in plans for hiring and investment for many industries, pinning the Fed in a wait-and-see mode on interest rates.
Key highlights
On the US-China tariff reduction: It is definitely less impactful stagflationarily than the path they were on.
Yet it’s three to five times higher than what it was before, so it is going to have a stagflationary impulse on the economy. It’s going to make growth slower and make prices rise.
The way that we’re doing this is not free for the economy.
On hiring and investment by business contacts: the risk of trade agreements and tariff suspensions lapsing is preventing businesses from taking the leap.
Business' statements are coming with explicit recognition that this isn’t permanent and that it’s going to be revisited in the near future.
Part of those business announcements are explicitly putting off into the future major decisions.
If we could get the dust out of the air, it would make sense to think that rates would be going down.
The bar for action has to be high when there’s so much uncertainty.
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