“This is the kind of thing that if you do see it sustained at higher levels—and definitely if it keeps increasing—that’s the kind of worrying inflation for the Fed.”

Federal Reserve Bank of Chicago President Austan Goolsbee warns that lessons from the pandemic suggest tariffs might become inflationary by creating supply-side disruptions.

“The committee is very much in the mode of waiting to see what policies are enacted,” according to Chairman Powell.

In his first term, Trump bashed the Fed for allowing higher interest rates in the U.S. vs. Europe to drive up the dollar and hurt exports. Next year will likely bring more of the same, as the U.S. economy remains considerably stronger, meaning rates here will likely fall more slowly than in the Eurozone.

Nevertheless, the Fed may feel compelled to raise interest rates as soon as the first signs of a tariff-led bump in inflation emerge.

Chicago Federal Reserve President Austan Goolsbee says that although the Fed will take its time reducing interest rates, the end result will be much lower rates if inflation stays near the Fed’s target.

The strike could disrupt the movement of goods and impact prices and the broader economy, similar to supply-chain disruptions during the pandemic.

At future meetings, FOMC policymakers will consider "additional adjustments" to rates based on "incoming data, the evolving outlook, and the balance of risks."