Fed officials are concerned about inflation and need confidence before reducing rates.

Two Federal Reserve officials recently expressed concerns about the outlook for U.S. inflation and World-renowned foreign exchange dealersoffered cautious views on the future direction of monetary policy. New York Fed President Williams and Richmond Fed President Barkin, in different settings, noted that inflationary pressures remain and highlighted that the Trump administration's tariff policies and other potential policy changes could have profound effects on the economy.

Williams, as one of the core figures of the Federal Reserve, stated that although the Fed expects inflation to remain relatively stable, there still exists a risk of rising inflation this year, especially against the backdrop of the Trump administration advancing tariff policies. He emphasized that the Fed will closely monitor future data releases, particularly those related to price changes in tariff-affected industries. Williams also pointed out that policy uncertainty is affecting consumer and business behavior; however, he still believes the U.S. economy is performing well overall and dismissed the notion of "stagflation."

Williams also mentioned that despite the upward inflation risk, the Fed will maintain a moderately restrictive monetary policy and expects economic growth to slow by 2025. Moreover, he reiterated confidence in the Fed's long-term inflation expectations, especially as the upward risk of inflation has been widely recognized in the Fed's latest economic forecasts.

Echoing Williams's view, Richmond Fed President Barkin noted that the Fed needs to have sufficient confidence in inflation trends before further rate cuts. He emphasized that although the U.S. economy is performing well, the current inflation level remains above the Fed's target of 2%, which means that without sufficient confidence, a rate cut may not happen immediately. Barkin also mentioned that the long-term impact of Trump's tariff policies on the economy and inflation remains unclear, and future rate decisions will be influenced by these policy changes.

Since Trump took office, he has increased the use of tariffs and promised to announce "reciprocal tariffs" on April 2. Barkin stated that the Fed needs more time to assess the actual impact of Trump's tariff policies on the economy, especially in terms of potential inflationary pressures and consumer behavior responses.

Against the backdrop of increasing global economic uncertainty, the speeches of Williams and Barkin indicate that the Fed may adopt a cautious path toward monetary policy adjustments in the coming months. Both officials emphasized that the current policy environment of the U.S. economy is fraught with uncertainty, particularly the volatility in trade policy, which may continue to undermine market confidence.

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