Home / Business and Economy / Fed Warns: Tariffs Fueling Inflation, Rate Cuts Watched
Fed Warns: Tariffs Fueling Inflation, Rate Cuts Watched
12 Dec, 2025
Summary
- Inflation pressures expected to persist into early 2026.
- Tariffs are a key factor influencing upcoming inflation trends.
- Federal Reserve is closely monitoring price impacts before rate decisions.
Federal Reserve Chair Jerome Powell indicated that inflation pressures are likely to continue into early 2026. He highlighted the substantial impact of tariffs on goods inflation, which is currently offsetting moderation in services inflation. This situation presents a challenging outlook for the economy.
The Federal Reserve recently reduced its benchmark interest rate for the third consecutive meeting. However, the central bank will carefully assess the ongoing effects of tariffs on prices as it determines its subsequent monetary policy actions. Persistent inflation could necessitate higher interest rates for a longer duration, potentially slowing economic growth.
Officials project that the Federal Reserve's preferred inflation gauge may decrease to 2.4% in 2026. Despite this forecast, Powell cautioned that inflation could temporarily rise as the full effects of tariffs, implemented in early August, become apparent over the next nine months.
