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Investing.com-- Atlanta Federal Reserve President Raphael Bostic said on Thursday that new policies under the Donald Trump administration were pushing up uncertainty over the economy, while higher trade tariffs also raised the prospect of sticky inflation.
Bostic- who is a member of the Fed’s rate-setting committee- said that it was doubtful that the Fed will have enough clarity on the economy to alter interest rates before late-spring or summer.
“It’s hard to know exactly where things are going to land,” Bostic said at an event hosted by the Birmingham Business Journal, stating that the economy was in an “incredible flux.”
Bostic flagged uncertainty over Trump’s trade and immigration policies, negative consumer sentiment, spikes in inflation and geopolitics, which was clouding the U.S. economic outlook.
His comments come amid growing conviction that the Fed will keep interest rates on hold until at least May. While recent consumer sentiment data pointed to some cooling in the U.S. economy, inflation still remained above the Fed’s 2% annual target.
The central bank had kept rates unchanged in January and signaled no near-term changes, citing concerns over an uncertain policy outlook and sticky inflation.
Bostic warned that higher import tariffs will translate into higher prices for American households, although whether it would result in higher inflation was “an open question.”
Trump imposed a barrage of trade tariffs against Canada, China, and Mexico in his first month in office. The U.S. president had earlier this week imposed 20% tariffs on China and 25% tariffs on Canada and Mexico, although he did make concessions for key sectors such as automobiles.
Still, Bostic noted that measures by Trump to increase domestic energy production and scale back regulations were being positively received by businesses.
The Fed is set to meet later in March, and is widely expected to keep rates unchanged.