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Investing.com -- New tariffs announced by President Trump have complicated the inflation outlook, making it harder for Chicago Fed President Austan Goolsbee to support interest rate cuts that the president has been advocating for.
In an interview with the Wall Street Journal Friday, Goolsbee explained that anxiety about tariffs pushing up prices had calmed substantially in recent months after Trump paused steep bilateral tariffs proposed in April. This had positioned the Federal Reserve to ease interest rates again soon.
However, the latest round of tariffs - including a 35% levy on some Canadian imports and a 50% tariff on goods from Brazil, scheduled to begin August 1 - could reignite inflation concerns. This might force the Fed to maintain its cautious approach until more clarity emerges.
"I’m hopeful that when we go back and talk to [businesses] now, they don’t say, ’Oh, this is putting us back to where we were on April 3,’" Goolsbee said. "But I don’t know, because this has just happened."
Goolsbee added that continued additions to the mix that create uncertainty about price trends are "just throwing more dirt back in the air."
Despite these challenges, Goolsbee expressed confidence in the Fed’s independence from political pressure, stating, "I’m still pretty confident that the culture of the Fed is one that everyone takes the job seriously and recognizes how important independence is from political interference."
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