03/19/2025

The Federal Reserve May be Forced to Choose Between Cheap Groceries and Secure Jobs

Tariffs are impacting the Fed’s mandate for stable prices and full employment

The Federal Reserve may be faced with an impossible choice as officials try to steer the economy around tumultuous White House polices: higher prices or fewer jobs.

Fed Chair Jerome Powell may start to give a hint of which way the central bank is tilting Wednesday, at a news conference following the conclusion of its two-day board meeting. Analysts expect interest rates to remain unchanged at a level between 4.25 and 4.5 percent. But later this year, officials will need to consider several options — including raising rates to bring down stubborn inflation, or cutting them to rev up the economy as President Donald Trump's higher tariffs weigh on economic growth.

"If you are the Federal Reserve, you can't figure out if you go to the [brakes] because of price increases or the accelerator because of lost jobs," former treasury secretary Lawrence Summers said Tuesday on the social media platform X, formerly known as Twitter. He added that the Fed is in a "hard position" because the "shock is both pushing up prices, in terms of imports, and reducing jobs, in terms of input costs. This is what tariffs do."

Please select this link to read the complete article from The Washington Post.