Fed's Barr: Tariffs Drive Up Inflation and Slow Down Economy, Fed May Face Dilemma

According to ChainCatcher, as reported by Jinshi, Federal Reserve's Barr stated that Trump's trade policies might increase inflation, reduce economic growth, and raise unemployment later this year, which could present policymakers with a tricky decision on which issue to address.

Barr said, "The scale and scope of the recent tariff increases are unprecedented, and we don't know their final form. It's too early to say how they will impact the economy." However, he noted that the risks are evident. "In my view, higher tariffs could lead to disruptions in the global supply chain and exert sustained upward pressure on inflation," he stated.

He also pointed out that businesses need time to adjust their distribution networks. Some suppliers, especially small businesses, may not be able to adapt quickly enough and could go out of business, exacerbating supply chain chaos.

Barr said, "I am equally concerned that as the economy slows, tariffs will lead to a rise in unemployment." "Therefore, if we see both inflation and unemployment rising simultaneously, the Federal Reserve could be in a predicament."