Inflation Concerns Resurface as Tariffs Loom

Federal Reserve Bank of St. Louis President Alberto Musalem has raised alarms over a "distinct possibility" of inflation reaccelerating in the near term. This warning comes despite observable softening in the labor market, highlighting the complex challenges facing the U.S. economy.

Disinflation Progress Stalls

Musalem pointed out that there has been limited progress on disinflation since mid-2024. He emphasized the impact of new tariffs, with firms already planning to raise prices, which could fuel a second wave of inflationary pressures.

Economic Outlook Darkens

The Fed official also flagged several concerning trends, including weakening loan demand, deteriorating consumer credit conditions, and increasing price sensitivity among households. These factors collectively paint a cautious picture for the economic outlook.