New York Federal Reserve President John Williams projected that the effect of tariffs could phase out from the inflation rate in the coming quarters.
The impact of tariffs, mainly shouldered by domestic producers and consumers, has “not yet fully played out,” said Williams in his remarks at the Cynosure Group Spring Symposium in New York City on Monday.
Furthermore, the Middle East conflict is pushing up oil and input costs, leading to higher prices for fuel, airfares, groceries, fertilizers, packaging, and other consumer goods, he said.
However, Williams anticipates the pass-through of existing tariffs to prices to be largely completed in the forthcoming months, leading to a fading effect on the inflation rate. He projected a new wave of tariffs in the near future, though, which would exert additional upward pressure on import prices.
Williams highlighted that despite these factors, the labor market is not contributing to inflation pressures, as evidenced by the New York Fed’s Labor Market Tightness Index and corroborated by wage growth data. He stated that the inflation expectations remain “well-anchored,” helping support price stability even during economic shocks and uncertainty.
However, he expects inflation to stay above the 2% target, primarily due to increased tariffs and energy costs.
Americans Feel Inflation Squeeze
William’s comments come on the heels of last month’s study by the Federal Reserve, which confirmed that tariffs implemented by President Donald Trump are entirely responsible for the recent surge in core goods inflation. The study estimated that tariffs implemented through November raised core goods personal consumption expenditure (PCE) prices by a staggering 3.1% through February.
At the same time, the alternative measure of core inflation, such as the trimmed-mean PCE inflation rate, promoted by the St. Louis Fed, has drawn criticism. Otavio Costa, CEO of Azuria Capital LLC, stated that the new measure, associated with Fed Chair nominee Kevin Warsh, intentionally obscures the reality of soaring prices by excluding extreme price fluctuations from the data.
Meanwhile, a poll published late April found that 55% of Americans said that their finances are getting worse due to war-driven inflation, marking the fifth consecutive year that more Americans report worsening rather than improving financial conditions.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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