US Federal Reserves warns Trump’s tariffs may increase prices – BBC.com
American shoppers may face higher prices if US President Donald Trump goes ahead with some of his proposed tariffs, the US central bank has warned.Minutes from the Federal Reserve’s January meeting released on Wednesday revealed members of its committee believe Trump’s policies might “hinder the disinflation process”. “Business contacts in a number of districts had indicated that firms would attempt to pass on to consumers higher input costs arising from potential tariffs,” the minutes said.The release of the comments comes as the Fed faces criticism from Trump for not cutting interest rates sooner after leaving rates unchanged in the January meeting.The Fed minutes also revealed “elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies”.”A couple of participants remarked that, in the period ahead, it might be especially difficult to distinguish between relatively persistent changes in inflation and more temporary changes that might be associated with the introduction of new government policies,” the minutes added.The Fed minutes also showed the central bank’s readiness to hold rates steady amid stubborn inflation and economic-policy uncertainty.The central bank left the key interest rate unchanged in a range of 4.25% to 4.5% in the January meeting, hitting pause after a string of cuts late last year.The Fed’s chair Jerome Powell has previously said the bank was not “in a hurry” to cut more, given significant uncertainty about where the economy might be headedAnalysts predict the Fed will likely cut the benchmark interest rate only once in 2025, with a big possibility of no rate cuts at all.Trump’s campaign promises included calls for lower interest rates, which would bring relief to borrowers.It has sparked debate about whether he will respect the tradition of Fed independence, which is meant to keep it focused on the long term health of the US economy and away from politics.Mr Powell previously told reporters that he had had “no contact” with Trump and the bank was focused on the data in setting rates.But questions Powell faced about how the Fed is handling a new order from the White House to cancel diversity programmes – and why it had withdrawn from a global group of central banks focused on the risks of climate change to the financial system – underscored the challenges he will face keeping the bank above the political fray.The government admits that stemming price rises will be ‘bumpy’ as inflation hit 3% in January.The average house price in Northern Ireland rose by 9% during 2024, according to official data.The rate at which prices are rising remains above the Bank of England’s 2% inflation target.Pay outstripped price rises by 3.4% between October and December while the unemployment rate remains unchanged.US inflation increased by more than expected last month, pushing up the cost of living for Americans. Copyright 2025 BBC. All rights reserved. The BBC is not responsible for the content of external sites. Read about our approach to external linking.
