United States: Fed anticipates inflation linked to customs duties

US inflation could increase by one percentage point in the coming months, according to John Williams, President of the New York Federal Reserve. The reason: the Trump administration’s tariff increases on several imported products.

During a speech to economists in New York, the Fed official emphasized that the inflationary impact is only just beginning, with effects expected as early as the second half of 2025 and through early 2026.

At the same time, the economy is slowing: US GDP growth is expected at 1% this year, compared to 2.5% in 2024. Unemployment could rise to 4.5%, compared to 4.1% currently. And headline inflation is expected to remain between 3% and 3.5%, above the Fed’s 2% target.Despite this tense context, John Williams advocates maintaining a « moderately restrictive » monetary policy, in order to monitor the cumulative effects of price increases, while allowing room to adjust the trajectory in the event of an economic shock.

This scenario reflects the delicate equation facing the central bank: containing inflation without disrupting growth.

source: CCTV