US Fed warns Trump's tariffs may increase prices

The U.S. Federal Reserve (also known as the Fed) has warned that American consumers could face higher prices for goods if U.S. President Donald Trump continues to pursue his proposed tariff policies. This could potentially impact household budgets across the country.

Minutes from the Fed's January meeting, released Wednesday, revealed that its committee members believed Trump's policies could "impede the disinflation process." The minutes stated, "Business contacts in many districts indicated that firms would try to pass through prospective tariff-induced increases in input costs to their customers."

The release of these minutes comes as Trump criticizes the Fed for not cutting interest rates faster after holding them steady at the January meeting. The Fed's meeting minutes also showed "a high degree of uncertainty about the range, timing, and potential economic effects of possible changes in trade, immigration, fiscal, and regulatory policies."

The minutes added: "A few participants noted that, over the next little while, it might be especially difficult to distinguish between relative persistent changes in inflation and more temporary changes that might be associated with the introduction of new Administration policies." The Fed's meeting minutes also indicated that the Fed is prepared to hold interest rates steady amid persistent inflation and uncertain economic policies.

At the January meeting, the U.S. central bank held its key interest rate steady in a range of 4.25% to 4.5%, pausing after a series of rate hikes late last year. Fed Chairman Jerome Powell had previously stated that the Fed was in no "rush" to cut interest rates further, given the significant uncertainty surrounding the direction of the U.S. economy.

Analysts predict that the Fed may only cut rates once in 2025, and it is highly possible that it will not cut rates at all. Trump's campaign promises include calls for lower interest rates, which would provide relief for borrowers. This has sparked a debate about whether he will respect the tradition of the Fed's independence, which keeps the Fed focused on the long-term health of the U.S. economy, away from politics.

Powell previously told reporters that he has "no contact" with Trump, and the Fed focuses on data to set interest rates. However, Powell faces questions about how the Fed will handle the White House's new order to cancel diversity programs and why it withdrew from a global central bank group focused on the risks of climate change to the financial system, highlighting the challenges he will face in keeping the Fed above political squabbles.