Tariffs Trump Interest Rate Hike as Economists Weigh Trade War Impact
The Federal Reserve raised interest rates for the first time in three years, bringing the benchmark interest-rate range from 3.5%-3.75% to 3.75%-4%. The move is intended to reduce inflation, but economists believe it may not be enough if President Trump's policies on tariffs and trade continue.
Ryan Young, a senior economist at the Competitive Enterprise Institute, suggests that the Fed's path forward could largely depend on the Trump administration's next steps. He believes that ending the conflict in Iran, ending the trade war with Canada, and reducing or eliminating existing tariffs according to a predictable schedule would lower prices for Americans.
The impact of tariffs has been significant, contributing between 0.26% and 0.56% to excess core inflation beyond the Federal Reserve's 2% target from June 2025 and June 2026, according to calculations by the Federal Reserve Bank of St. Louis.