In a report that captured some of the early fallout from U.S. President Donald Trump’s erratic rollout of sweeping tariffs aimed at reshaping global trade, the Federal Reserve said Wednesday that U.S. prices are up and that economic activity and employment have not changed much since March across most of the country.
Based on surveys, interviews, and observations gathered from the commercial and community contacts of each of the Fed’s 12 regional banks, the U.S. central bank stated in its most recent snapshot of the country’s economic situation that “uncertainty around international trade policy was pervasive across reports.” “The outlook in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose.
Two weeks before each Fed policy meeting, the study, dubbed the “Beige Book,” helps capture the mood and reality of the economy. According to Fed Chair Jerome Powell, it’s crucial in forming his perception of the direction things are taking. Given that it is based on data gathered up to April 14, when tensions over international trade rapidly escalated, it could be especially instructive this time.
Because the central bank’s policy lever, the regulation of short-term interest rates, can only address one of those issues at a time, Powell and other Fed experts predict that the tariffs would likely result in both weaker economic growth and higher inflation. For the time being, central bankers want to hold off on acting until they have seen how Trump’s tariffs turn out and how the labour market and prices truly change.
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