ChainCatcher message, according to Jinshi reports, Trump has promised to implement comprehensive tariffs on imported goods upon returning to the White House. During his first term, Federal Reserve staff simulated similar scenarios and concluded that inflation would accelerate, but not last long. Eventually recognizing that tariffs had a drag on the economy, they suggested lowering interest rates as the best remedy.
However, there are two main obstacles to taking this approach now. First, the Federal Reserve has not fully overcome the post-pandemic inflation issue. Second, the Federal Reserve has faced severe criticism for describing that inflation surge as 'temporary.' Therefore, Powell and his colleagues are most reluctant to downplay the price spikes, believing they will not be persistent.
Justin Weidner, an economist at Deutsche Bank in the U.S., stated, 'Even a price increase that is seen as temporary could prompt the Federal Reserve to raise interest rates, or at least maintain a wait-and-see attitude, preventing them from significantly cutting rates as they had originally hoped. They must acknowledge the actual inflation rate. Perhaps they could avoid terms like 'temporary' or 'transitory' and instead say something like 'inflation is rising due to tariff effects,' clearly indicating that it is a result of tariffs rather than necessarily being demand-driven.'