Bostic Warns of Long-Term Inflation from Tariffs

Atlanta Federal Reserve President Rafael Bostic expressed concerns on Thursday about the potential for tariffs to create long-lasting inflation. He emphasized that this doesn’t just represent a temporary spike in costs.

Bostic pointed out that, according to standard economic theories, the expected combination of geopolitical changes and new U.S. trade policies may lead to a prolonged rise in prices over time, rather than a simple, short-term alteration.

As pressure mounts from President Donald Trump to modify monetary policy, Bostic has openly backed Federal Reserve Chairman Jerome Powell. Earlier this week, Powell noted that central banks should hold off on making changes while they assess how various fees impact prices.

Even though Bostic is not a voting member of the Federal Open Market Committee (FOMC), he believes that now, amid economic uncertainty, isn’t the right time for major shifts in policy.

The upcoming FOMC meeting is set for July 29th-30th. Notably, Trump’s 90-day pause on “mutual tariffs,” introduced on April 2nd, will conclude on July 9th.

Recent inflation data for March, April, and May 2025 indicated levels slightly above the Fed’s 2% target. While Bostic noted that tariffs haven’t had a significant impact on consumer prices, he cautioned that this doesn’t necessarily mean that the economy is free from tariff-related pressures. Instead, he believes it represents a “corporate strategy” that aims to temper price increases until final tariff rates are determined.

During a lecture in Frankfurt, Germany, Bostic commented just hours after the June employment report revealed stronger-than-expected job growth for the month. The economy added 147,000 jobs, with unemployment hitting 4.1%.

The Federal Reserve has been maintaining stable interest rates since December 2024, with a quarter-point reduction to its target range.

Powell reiterated on Tuesday that if tariffs were absent, the Fed would likely proceed to cut interest rates, adding uncertainty about when they might gauge the impact of such tariffs.

Bostic’s call for cautious monetary policy came as Richmond Federal Reserve President Tom Barkin evaluated the central bank’s position. In his remarks on Fox Business’s “The Claman Countdown,” Barkin likened the FOMC’s efforts to navigate the economic situation to “running through the fog.”

Barkin admitted uncertainty about the effects of policies on the economy, suggesting that unless there’s an urgent external impetus, he prefers to remain cautious.