Fed's Kugler: Higher than expected tariffs likely to send prices higher

Federal Reserve Board Governor Adriana Kugler said late Tuesday that with US import tariffs significantly larger than expected and likely to put upward pressure on prices, the Fed ought to keep short-term borrowing costs unchanged until inflation risks recede, per Reuters.

Key quotes

Tariff increases are significantly larger than previously expected.
Economic effects of tariffs and uncertainty likely to be larger than anticipated.
Supports holding policy rate steady as long as upside risks to inflation continue, while economic activity and employment remain stable.
Fed policy well-positioned for macroeconomic changes.
If financial markets tighten persistently, it could weigh on future growth.
Especially monitoring upside risks on inflation, downside risks on employment.
Inflation progress has slowed, remains above 2% goal.
Labor market solid, broadly in balance.
Longer-term inflation expectations are largely well-anchored, hopes they remain so.
First-quarter GDP may show moderation vs. 2024, but some front-loading of purchases to avoid tariffs.
Tariffs likely to put upward pressure on prices.

Market reaction 

At the time of writing, the US Dollar Index (DXY) is trading 0.76% higher on the day to trade at 99.73.