Federal Reserve officials warn that the impact of tariffs will become fully apparent, potentially leading to a new round of price increases

According to the Zhitong Finance APP, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, warned on Tuesday that companies' "buffer strategies" to cope with high tariffs are running out, and the U.S. economy may face a new round of price increases in the near future.

During a meeting hosted by the Atlanta Fed in Florida, Bostic stated, "We have heard that the impact of many tariffs has not yet truly reflected in the data. Previously, many companies responded to tariff shocks by importing in advance and building inventories." However, he pointed out, "We are now hearing from an increasing number of companies that these strategies... are nearing their end."

Bostic further noted, "If these pre-tariff response strategies have come to an end, we will soon see changes in prices, and then we need to observe how consumers will react."

Meanwhile, James Bullard, President of the St. Louis Fed, also pointed out in his speech that tariff issues remain one of the key factors affecting the U.S. economic outlook in the short term, potentially weakening overall economic activity and exacerbating labor market weakness. "Although the announcement on May 12 by both the U.S. and China to temporarily reduce tariffs has cooled the situation, overall, tariffs may still have a substantial impact on the recent economic outlook."

He believes that tariffs will suppress economic activity to some extent, leading to further softening of the labor market. However, he also emphasized that the current monetary policy of the Federal Reserve is in a "good position" to respond to any changes in the economic outlook, provided that inflation expectations remain firmly around the Fed's target level of 2%.

Bullard stated, "Currently, we need to maintain public confidence in the Fed's determination to combat inflation." He believes that as long as inflation expectations do not significantly deviate, the Fed has room to make a "balanced response" between inflation and employment.

Despite a slight slowdown in companies' willingness to invest and hire, Bullard pointed out that the U.S. economy still shows "potential resilience," and the overall financial environment remains supportive, including that bank credit conditions are still loose.

However, regarding inflation trends, Bullard remains cautious. He stated that the price pressures brought about by tariffs could be both short-term and persistent, presenting two possibilities. "If trade negotiations go smoothly and tariffs are ultimately further reduced, the economy may return to its previous path, and inflation is expected to continue to fall to around 2%."

However, he also warned that the Fed should not make premature judgments about the transitory nature of inflation. "If we decide now to ignore the inflation impact caused by tariffs or prematurely shift to an easing policy, we may underestimate the level of inflation and its persistence." He reiterated that in the face of ongoing inflationary pressures, the Fed should prioritize its price stability goals