Trump's auto tariffs complicate Fed's deliberations on rates

Ann Saphir - Reuters - 27/03
President Donald Trump's permanent 25% tariff on imported autos has expanded the global trade war, feeding expectations for higher prices for cars and other products, but doing little to settle the debate about how policies of his two-month-old administration will affect the U.S. economy.
  • Tariffs could have conflicting impacts on US economy
  • Traders continue to bet on three Fed rate cuts this year
  • Inflation data expected Friday, jobs data a week from Friday
March 27 (Reuters) - President Donald Trump's permanent 25% tariff on imported autos has expanded the global trade war, feeding expectations for higher prices for cars and other products, but doing little to settle the debate about how policies of his two-month-old administration will affect the U.S. economy.
With more tariff announcements looming next week, Federal Reserve policymakers remain in a holding pattern on interest rates. With surveys showing signs of economic trepidation and a drop in confidence, central bankers are watching to see if this spills into "hard" data like the still-low unemployment rate. They are also watching whether household and business fears of surging prices rekindle inflation that had been cooling.

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Fed officials remember that tariffs during Trump's first administration did trigger several rate cuts to cushion weakening output. Still, the high inflation of the early 2020s could set the economy up for a different trajectory this time.
"Tariffs on one hand push up prices a little bit, so maybe that's inflationary (and means) a higher interest rate path, if prices are ...
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