Federal Reserve officials warn that uncertainty surrounding Trump's policies may affect inflation and economic outlook

According to the Zhitong Finance APP, on Thursday, several Federal Reserve officials emphasized in public speeches that despite the overall robust performance of the U.S. economy, there remains uncertainty regarding the inflation path, and the trade, immigration, and fiscal policies of the Trump administration could have a significant impact on future economic trends.

St. Louis Fed President Alberto Musalem stated that the Federal Reserve's monetary policy should remain "moderately restrictive" until inflation steadily returns to the 2% target. He warned that the process of inflation retreating could stagnate or even reverse, with risks skewed to the upside.

In his speech at the New York Economic Club, Musalem pointed out that the U.S. economy remains strong, with a robust labor market, but future adjustments in government policy could have substantial effects on the economy. He emphasized, "Before inflation returns to target, monetary policy needs to remain moderately restrictive, and once the inflation path is confirmed, the policy rate can be gradually lowered to neutral levels."

However, he also noted that the impacts of policy changes remain uncertain. "Various changes in trade, immigration, regulation, fiscal, and energy policies, or other economic environment changes, could significantly affect the economic path."

Recently, U.S. inflation data has shown a rebound, with the January Consumer Price Index (CPI) indicating inflation growth exceeding expectations, which supports the Federal Reserve's cautious stance on interest rate cuts. Musalem stated that based on the latest inflation data, "more efforts are still needed to achieve price stability."

Atlanta Fed President Raphael Bostic expects the Federal Reserve to cut interest rates twice in 2025, but he acknowledged that the uncertainty of policy increases the difficulty of forecasting. He stated, "Currently, monetary policy is in a good state, and the economy remains strong, but we cannot be complacent."

Bostic also pointed out that the policies of the Trump administration could have differing impacts on inflation and economic growth, so the Federal Reserve needs to remain patient and wait for more data to confirm trends. He believes there is room for further interest rate cuts in the U.S. economy, but a balance must be maintained between inflation and employment.

Bostic emphasized that many businesses are taking a wait-and-see approach regarding potential new tariffs and tax policies from the Trump administration. "Some businesses believe that tax cuts and deregulation could be beneficial, but others are concerned that changes in trade and immigration policies will increase operating costs." He added, "Businesses are generally worried that tariffs will raise costs, and large-scale deportations of illegal immigrants could lead to labor shortages, especially in the construction and leisure industries."

Chicago Fed President Austan Goolsbee also expressed concerns about the Trump administration's tariff policies. He stated that although the overall trend of U.S. inflation is positive, the implementation of large-scale tariffs could trigger new supply chain shocks, leading to a resurgence in inflation.

He pointed out, "Currently, the CPI data is not ideal, but the upcoming Personal Consumption Expenditures (PCE) price index is not expected to be as disappointing as the CPI." However, he still emphasized that future policy uncertainty is a challenge that both the market and the Federal Reserve must face.

Goolsbee stated that the tariff policies during the first term of the Trump administration had limited effects on inflation, mainly due to their narrow scope and inclusion of exemption clauses. However, if the new round of tariffs has a broader scope and higher rates, its impact could be similar to the supply chain shocks experienced during the COVID-19 pandemic. "The impact of tariffs depends on the number of countries involved and the extent." If its scale approaches the supply shock during the COVID-19 pandemic, it is worth being vigilant