NY Fed's Williams Says Trump Tariffs May Have Added Up To 75 Bps To Inflation, But Sees Room For A Further Cut

• Williams stated that it’s not possible to precisely measure the impact of trade policy actions on inflation with precision.
• He noted that inflation expectations are well anchored, the labor markets are not creating inflationary pressures, and that wage growth has moderated.
• However, he added that the downside risks to employment have increased, while the upside risks to inflation have eased to an extent.

John Williams, President of the Federal Reserve Bank of New York, on Friday stated that President Donald Trump’s tariffs have contributed about 50 to 75 basis points to inflation.

In prepared remarks at the Central Bank of Chile Centennial Conference, Santiago, Chile, Williams stated that it’s not possible to precisely measure the impact of trade policy actions on inflation with precision.

Impact Of Trump Tariffs

However, Williams attributed some of the current inflation to the Trump administration’s tariffs.

“My estimate is that increased tariffs have contributed about one half to three quarters of a percentage point to the current inflation rate. I do not see any signs of tariffs contributing to second-round or other spillover effects on inflation,” Williams said.

He noted that inflation expectations are well anchored, the labor markets are not creating inflationary pressures, and that wage growth has moderated. However, he added that downside risks to employment have increased, while upside risks to inflation have eased to some extent.

Room For A Further Cut

Williams stated that while it is important to bring inflation back to the Federal Reserve’s long-term goal of 2%, it is important to do so without creating undue risks to the goal of maximum employment.

He stated that the Federal Reserve's current monetary policy is “modestly restrictive” and that he sees some room for further adjustment following the 25 bps rate cuts in September and October.

Williams’ comments boosted the odds of a December rate cut. According to data from the CME FedWatch tool, the probability of a 25-basis-point rate cut next month is now 70.9%, up from 39.1% a day ago.

Meanwhile, U.S. equities were up in Friday’s midday trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.53%, the Invesco QQQ Trust ETF (QQQ) gained 0.21%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) rose 0.74%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.27% at the time of writing.

Also See: Dan Ives Shoots Down AI Skeptics, Cites 5 Times Doubters Got It Wrong — From Apple To Netflix And Beyond

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Share

·

Add us on