The Federal Reserve’s efforts to orchestrate a “soft landing” for the United States economy are facing a torrent of uncertainty as the central bank makes its first decision of the year on interest rates this week.
Economic policymaking in the United States is in the midst of a sharp change of course. The Fed is considering a pause to interest rate cuts as President Trump is poised to impose tariffs on Canada, Mexico and, potentially, China on Saturday. The Trump administration has rebuked the idea that these levies would fuel inflation, but the prospect of blanket tariffs are expected to raise prices for consumers on a number of goods, complicating the Fed’s future moves.
“Imposing any of these suggested tariffs would generate a rebound in consumer price inflation this year, taking it further above target and making it harder for the Fed to resume loosening monetary policy,” Paul Ashworth, chief economist for North America at Capital Economics, wrote in a note to clients on Tuesday.
Mr. Ashworth estimates that if Mr. Trump’s proposed tariffs are fully put in place, it could set off a rebound in consumer prices later this year, pushing inflation up to between 3 percent and 4 percent.
Mr. Trump has discussed imposing what he calls a “universal” tariff of 10 percent on all imports; a 10 percent tariff on Chinese imports; and a 25 percent tariff on imports from Mexico and Canada. It is not clear whether these tariffs would be stacked on top of one another or whether there would be exemptions for certain products.
In its latest World Economic Outlook report, the International Monetary Fund projects 2.7 percent U.S. economic growth in 2025, up from a previous estimate of 2.2 percent.
The I.M.F. noted, however, that there was considerable uncertainty over its forecasts because of Mr. Trump’s tariff policies and the potential that other countries would respond with tariffs of their own.
