Fed Minutes: Trump Heightens Inflation Concerns
Participants in the Federal Reserve’s January 28-29 meeting generally pointed to upside risks to inflation rather than concerns over the labor market, according to minutes released on Wednesday.
President Donald Trump’s early policy proposals have fueled concerns within the Federal Reserve about rising inflation, central bank officials noted in a meeting held roughly a week after the Republican’s inauguration.
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“Participants specifically cited the potential effects of possible changes in trade and immigration policies, the risk of geopolitical events disrupting supply chains, or stronger-than-expected household spending,” the minutes stated.
While officials remain confident that price pressures will continue to ease, the minutes also acknowledged that “other factors could hinder the disinflation process.”
One key concern was that “business contacts across several Fed districts indicated that companies would attempt to pass higher input costs—stemming from potential tariffs—onto consumers.”
Participants also noted that some inflation expectation measures, a critical concern for the Fed, “had recently increased.”
Officials agreed to keep interest rates steady until there was clear evidence that inflation—largely stagnant since mid-2024—was reliably declining toward the central bank’s 2% target.
A Shift in Outlook
Fed policymakers had already adjusted their outlook in the December meeting, anticipating slower growth and higher inflation based on “placeholder assumptions” regarding Trump’s likely actions during his second term.
In his first days in office, Trump began providing details on his policy agenda, including a proposed 25% tariff on Canada and Mexico and a southern border closure.
At its latest meeting, the Fed left its benchmark interest rate unchanged in the 4.25%-4.50% range.
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