Feds Barr: Tariffs May Cause Persistent Inflation, Not Hurrying to Cut Rates
Federal Reserve Governor Michael Barr on Tuesday expressed concern that higher import levies could put upward pressure on prices that may not be temporary, suggesting that he is not in a hurry to cut interest rates despite progress toward 2% inflation.
In remarks prepared to open an event in Omaha, Nebraska aimed at getting feedback on Fed policy and a read on current economic conditions from business and community leaders, Barr said that he expects inflation to rise due to tariffs. He added that higher short-term inflation expectations, supply chain adjustments, and second-round effects may cause some inflation persistence.
At the same time, Barr noted that tariffs may slow the economy and drive up unemployment, which has been low and steady at 4.2% in May.
"There is still considerable uncertainty about tariff policies and their effects," Barr said. "Monetary policy is well positioned to allow us to wait and see how economic conditions unfold."
The Fed left short-term borrowing costs in the 4.25%-4.50% range last week, and Fed Chair Jerome Powell underscored the central bank's "wait-and-see" approach to interest-rate setting as it assesses the effect of tariffs on inflation over the next few months.
Barr's remarks differ from those of Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman, each of whom in recent days said they could see a July rate cut given their view that tariffs are likely to deliver only a one-time bump to inflation.
"Monetary policy sometimes requires tradeoffs - a stance of policy that is necessary to lower inflation, for example, may also lower aggregate demand and slow the economy," Barr said. "Crucial in balancing our economic goals is determining how policy decisions affect households and businesses, which is why we are here to listen to you."
The picture accompanying this article shows a group of people attending the event in Omaha, Nebraska where Barr made his remarks. [Image: https://antiochtenn.com/zb_users/upload/2025/06/20250626145836175092111619126.jpg]
