A senior federal reserve official said on Friday that the tremendous uncertainty created by President Donald Trump’s tariff caused some companies to be employed, and threatened to spend, and threaten them.Slow the economyBut he added that it was not yet clear whether the central bank should reduce the main interest rate.
Tom Parkin, head of the Richmond branch in the Federal Reserve, said that companies have become careful, although they have not yet been involvedSevere functional discountsOr another typical behavior of stagnation.
“The way I describe it is really difficult to drive when it is blurry,” Parkin said in remarks in Ludon Province, Virginia Chamber of Commerce. “This is what I see on the work aspect. Employment freezes, and the estimated spending is reduced, but not the main workers’ demobilization.”
Parkin and other speakers of the Federal Reserve confirmed on Friday the difficult challenge facing the central bank at the present time. If the customs tariff raises inflation, the Federal Reserve will keep the rates high – or raise them more. But if the fees increase the economy, the Federal Reserve usually reduces rates.
Wednesday, President of Jerome Powell He said The risk of high inflation and high unemployment is increasing and that the Federal Reserve will wait for a greater clarity around the place where the economy is heading before taking its next step. Powell spoke after the Federal Reserve kept its main rate unchanged for the third consecutive meeting.
Trump, however, continued to insult Powell toNot lowering ratesWhich over time can reduce borrowing costs for consumers and companies.
Trump pays price cuts because he argues that the economy is no longer suffering from high inflation that motivated the federal reserve to raise borrowing costs sharply in 2022 and 2023.
But economists are the most likely reason to reduce the federal reserve rate in the coming months, will be to compensate for a sharp slowdown in the economy caused by definitions. Companies also see high costs due to their high duties – about half of the imports are the parts used by American companies – they can spread widespread layoffs, and pay unemployment and stagnation risk.
Gregory Daco, chief economist in EyA consulting company said that it believes that the Federal Reserve should reduce prices soon because “the economy slows down and will continue to slow down and flirt with the recession.”
However, one of the main challenges of the Federal Reserve Currently is to determine the risks that are greater for the economy, inflation or unemployment.
Parkin said it was too early to say that there is a need for low borrowing costs to increase growth.
Parkin said: “We have risks on the side of inflation, and if I see as I see that we have risks on the side of unemployment, then I declare that one of the risks is more important than the other at the present time it seems to be guessy,” Parkin said.
Parkin is one of the 19 officials who participate in the eight annual Federal Reserve meetings to decide on the interest rate policy. Only 12 of these members vote on the decision. Parkin is not a voter this year.
On Friday, other federal reserve officials echoed the Parkin’s cautious message.
Michael Bar, a member of the Conservative Council of the Federal Reserve in Washington, said the definitions can raise inflation for a long time, which is likely to leave the Federal Reserve. This is unlike some economists, who believe that duties will only increase prices.
“The high definitions can disrupt global supply chains and create continuous upward pressure on inflation,” said Bar in the written notes that were delivered earlier on Friday at a conference in Reheervik, Iceland.
However, Parkin seemed to take a different view of inflation in his observations. He suggested that consumers with financial hardship are hesitant to pay higher prices for a long time, which may force manufacturers and retailers to eat additional costs of definitions.
Parkin said: “This means that it is good to say that you will transfer it, but it is not easy to pass it as you think,” Parkin said.
This story was originally shown on Fortune.com
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