(Reuters) -Higher import levies will put upward pressure on prices that may not prove temporary, Federal Reserve Governor Michael Barr said on Tuesday in remarks that suggest he is in no rush to cut interest rates despite what he called “gradual, albeit uneven” progress toward 2% inflation to date.
“I expect inflation to rise due to tariffs,” Barr said in remarks prepared to open an event in Omaha, Nebraska aimed at getting feedback on Fed policy and a read on current economic conditions from business and community leaders. “Higher short-term inflation expectations, supply chain adjustments, and second-round effects may cause some inflation persistence.”
At the same time, he added, tariffs may slow the economy and drive up unemployment, which has been low and steady. May’s unemployment rate was 4.2%.
“There is still considerable uncertainty about tariff policies and their effects,” Barr said. “Monetary policy is well positioned to allow us to wait and see how economic conditions unfold.”
The Fed last week left short-term borrowing costs in the 4.25%-4.50% range. Fed Chair Jerome Powell in congressional testimony earlier on Tuesday underscored the central bank’s “wait-and-see” approach to interest-rate setting as it assesses the effect of tariffs on inflation over the next few months.
Barr’s remarks differ from those of Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman, each of whom in recent days said they could see a July rate cut given their view that tariffs are likely to deliver only a one-time bump to inflation.
“Monetary policy sometimes requires tradeoffs – a stance of policy that is necessary to lower inflation, for example, may also lower aggregate demand and slow the economy,” Barr said.
“Crucial in balancing our economic goals is determining how policy decisions affect households and businesses, which is why we are here to listen to you.”
(Reporting by Ann Saphir; Editing by Andrea Ricci)
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