Fed Caught Between Tariff Inflation and Growth Risks

The Federal Reserve faces a delicate balancing act as Trump's tariffs threaten to boost inflation while simultaneously slowing economic growth, potentially forcing the Fed to choose between curbing rising prices or supporting a faltering economy amid forecasts of soaring inflation and stagnant or recessionary growth.

• The Federal Reserve faces a dilemma in responding to potential impacts of Trump's new tariffs, which could boost inflation but slow economic growth.
• If tariffs drive up prices significantly, the Fed may be hesitant to cut rates to support growth, as that could fuel further inflation.
• Economists expect the tariffs, unless negotiated lower, could push core inflation above 3% in 2025 while taking growth near zero or into recession.