US Treasury Secretary Janet Yellen has warned that President-elect Donald Trump’s proposal for broad import tariffs could hinder inflation-cooling efforts and drive up consumer prices.
With the Federal Reserve (Fed) warning that it may not be able to bring inflation back to its 2% target, as recent data suggests progress in reducing inflation appears to be stalling, the US continues to face multiple challenges in solving the inflation problem.
Speaking at the Wall Street Journal CEO Council Summit, Treasury Secretary Yellen expressed concern that imposing broad tariffs on imports could derail the progress in controlling inflation, thereby affecting the growth of the world’s largest economy.
Yellen assessed that this policy could lead to significant price increases, disadvantaging domestic consumers while creating cost pressures for companies dependent on imported goods, thus affecting the competitiveness of certain sectors and adding to the cost burden on families.
According to the US Department of Commerce report, in October 2024, the personal consumption expenditure (PCE) price index - the FED’s inflation measure - increased by 2.3% compared to 2023. The core PCE index, excluding food and energy, rose 2.8% compared to October 2023, slightly up from 2.7% recorded in September 2024 but still above the 2% target.
According to New York Fed President John Williams, achieving the inflation target will take time due to uneven progress.
The Fed is scheduled to hold this year’s final monetary policy meeting on December 17 and 18. Experts predict the central bank will likely implement its third interest rate cut of the year.
At the recent policy meeting, the Fed reduced the target federal funds rate by 0.25 percentage points to 4.5-4.75% amid cooling inflation and a weakening labour market, marking the second rate cut in this easing cycle.
Fed officials expressed confidence that inflation is decreasing and expect to gradually lower interest rates in the future. However, some analysts worry that inflationary pressures, including the potential impact of proposed tariffs under President-elect Trump’s administration, could backfire and push inflation higher.
President Joe Biden’s recent speech at the Brookings Institution in Washington highlighted current US economic achievements. Biden argued that his efforts to boost infrastructure and manufacturing investment prevented a larger economic crisis and laid the foundation for continued growth.
He expressed hope that Trump’s new administration would maintain and build upon this progress while acknowledging persistent issues, such as American workers struggling with inflation and high housing costs.
Although efforts to cool inflation have made positive progress, consumer price inflation remains a significant concern for families in the US as they enter the Christmas season.
NDO
