US Fed officials warned that tariff inflation could "take root," and the central bank must prevent expectations from spiraling out of control.

Dallas Fed President Lorie Logan recently warned that US Fed officials must ensure that any inflation triggered by tariffs does not evolve into more persistent inflation.

On Thursday, April 10, the Dallas Fed released Logan's speech. In her remarks, Logan cautioned that after the recent round of inflation, US consumers' expectations for future price increases may become less stable.

Logan stated, "To sustainably achieve our dual mandate goals, it is crucial to prevent any tariff-related price increases from fostering more stubborn inflation. At this point, I believe the current monetary policy stance is appropriate."

Last week, Fed Chairman Powell mentioned in his speech that he expects US tariff measures to push up inflation and slow economic growth, and the US Fed will not adjust interest rates until the final impact of tariffs becomes clear.

However, an increasing number of US Fed officials are beginning to worry that Trump's trade policies may trigger a more persistent upward trend in inflation. Meanwhile, Trump continues to pressure the central bank, urging policymakers to ease monetary policy sooner.

Logan pointed out that Trump's unexpected tariffs could raise unemployment and exacerbate inflation, "The persistence of inflation depends on how quickly businesses pass on the increased costs and whether long-term inflation expectations remain stable."

Earlier in the day, the US Bureau of Labor Statistics reported that the US Consumer Price Index (CPI) rose 2.4% YoY in March, below the market's general expectation of 2.5%; core CPI increased 2.8% YoY, the smallest rise since March 2021.

After the report was released, Trump quickly posted these figures on social media, on one hand, attributing the decline in inflation to the new administration's achievements, and on the other hand, using it to urge the US Fed to lower the benchmark interest rate sooner.

However, it should be noted that both 2.4% and 2.8% are still some distance from the US Fed's 2% inflation target. Logan stated that if inflation persists, combined with the experience of the past few years, it may prompt households and businesses to develop stronger expectations for future price increases.

Inflation expectations are a key indicator closely monitored by central bank officials. In the 1970s and 1980s, persistently high inflation expectations made the US Fed's task of curbing inflation more challenging.

Logan said, "History tells us that once higher inflation expectations become entrenched, the path to restoring price stability will be longer, the labour market will be weaker, and the economic scars will be deeper."