Fed's Bostic: More businesses say they can't delay tariff response any longer

Federal Reserve (Fed) Bank of Atlanta President Raphael Bostic hit newswires on Tuesday, warning that more businesses are geared to begin adjusting their prices and employment numbers as US tariffs begin to work their way through the US economy. With trade policies set to run roughshod over domestic consumption and production, the Fed is increasingly bound to sit back and wait to see the fallout before making any changes to policy rates.

Key highlights

Further instability in the Treasury market would add to uncertainty. Adding even more uncertainty would cause further delays in policy changes as the Fed seeks more clarity.

Market functioning is not a risk today.

Certainty means the rules for trade, and other aspects of the economy, are stable enough for people to make long-run spending and investment plans.

The US economy is going to see a slowdown in activity, but how it plays out by sector and nationally is hard to say.

The Fed needs to be more certain about the outlook to be comfortable about how monetary policy should shift.

Businesses say demand is still strong enough to justify their current workforce, though they are developing contingency plans.

Consumer balance sheets are not as strong as they were three or four years ago, some are back to pre-pandemic levels, or maybe even weaker.

There is a lot that is unknown about how consumers will respond to another round of inflation. Households may be more price-sensitive now.

The current US tariff level is better than it was as initially proposed, but still high enough that it is difficult to assess what will happen.