Fed's Musallem: Fed should be wary of continued inflation driven by tariffs

Planet Daily News: Federal Reserve's Mussa stated that he is closely monitoring whether the rise in short-term inflation expectations will seep into long-term expectations, which could make fighting inflation more difficult and reduce the Federal Reserve's flexibility in addressing labor market weakness. He noted that the effects and timing of tariffs and other new policies are highly uncertain, and there is a "significant possibility" of inflation reaccelerating even with a soft job market. He said the Federal Reserve's policy is in a favorable position and should remain vigilant. He stated: "I am cautious about the assumption that 'the impact of tariffs on inflation is only temporary or limited'." "I believe that using monetary policy to 'defend against' second-round effects is appropriate, although in practice, distinguishing between potential inflation and the direct, indirect, and second-round effects of tariffs may be challenging." (Jinshi)