"Support Powell! US Fed Governor: Tariffs Expected to 'Persistently' Drive Up Inflation, Should Continue to Wait and See"

Michael Barr, a Fed Governor and recently departed Vice Chairman for Supervision, said on Tuesday that he expects US President Trump's tariff policies to exert upward pressure on prices, and that this pressure may not be temporary.

Although Barr believes that inflation is currently moving "slowly and unevenly" towards the US Fed's 2% target, he still suggested in his latest remarks that "there is no rush to cut interest rates now."

Speaking at an event hosted by the Federal Reserve Bank of Kansas City in Omaha, Barr said, "I expect inflation to rise due to tariffs. Higher short-term inflation expectations, supply chain adjustments, and second-round (tariff) effects could lead to persistent inflation." The event aimed to gather feedback from business and community leaders on the Fed's policies and their interpretations of the current economic situation.

Meanwhile, he added that tariffs could slow economic growth and push up unemployment, although the economy is currently on a solid footing with low and stable unemployment. The unemployment rate in May was 4.2%.

"There is still considerable uncertainty about the tariff policies and their impacts. Monetary policy is in a favorable position to allow us to wait and see how the economic situation unfolds. " Barr said.

This aligns with the stance of Fed Chairman Powell. Earlier on Tuesday, Powell, during a hearing before the House Financial Services Committee, said that he expects inflation to start rising soon and that the Fed will continue to monitor the economic situation before deciding whether to lower interest rates.

"For now, we are in a good position to wait and see, to learn more about where the economy might be headed, before considering adjusting our policy stance," he said.

However, there has been significant divergence within the Fed recently. Fed Governors Christopher Waller and Michelle Bowman, the Vice Chair for Supervision, have both indicated in recent days that they might support an interest rate cut in July, as they believe tariffs may only push up inflation temporarily.

Since taking office, President Trump has consistently "blamed" Powell and pressured the Fed to call for interest rate cuts. Before Powell's hearing, Trump again lashed out on social media, saying that Fed rates should be lowered by at least 2 to 3 percentage points and calling on Congress to "teach a lesson" to Powell, the "stubborn" Fed Chairman.

"Mr. 'Too Slow' Fed Chairman Powell is going to Congress today to explain why he refuses to cut interest rates. "Europe has cut interest rates 10 times, while we haven't done it even once," he wrote.

Barr said, "Monetary policy sometimes requires trade-offs. For example, the policy stance necessary to reduce inflation may also reduce aggregate demand and slow economic growth."

"It is crucial for balancing our economic goals to determine how policy decisions affect households and businesses. That's why we're here to listen to your opinions," he added.