The Federal Reserve is closely monitoring the economic impact of the new Administration's policy changes in trade, immigration, fiscal policy, and regulation. These policies, still evolving, introduce significant uncertainty into the economic outlook.
The Fed acknowledges that the announced tariff increases are larger than anticipated, likely leading to higher inflation and slower economic growth. The central bank is prepared to respond as needed to maintain price stability and maximum employment.
The Fed's primary concern is to keep longer-term inflation expectations well-anchored, ensuring that any temporary rise in prices does not translate into a persistent inflation problem. The Fed will balance its dual mandate goals, considering the distance from each goal and the time horizons for closing those gaps.
For the time being, the Fed is well-positioned to wait for greater clarity before considering any adjustments to its policy stance. The Fed will continue to analyze incoming data, the evolving outlook, and the balance of risks.