Fed says Trump trade, immigration stance might "hinder" lower inflation
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Fed chair Jerome Powell speaks during a news conference last month. Photo: Al Drago/Bloomberg via Getty Images
Federal Reserve officials said shifts in trade and immigration policy are among the factors that could derail inflation progress, according to minutes from the central bank's latest policy meeting released on Wednesday.
Why it matters: After two years fighting inflation, progress on cooling prices has stalled. The policies at the heart of President Trump's economic agenda — high tariffs and a crackdown on undocumented immigration — could risk a more bleak inflation outlook.
What they're saying: At the Fed's policy meeting, held Jan. 28-29, some officials called out factors that have "the potential to hinder the disinflation process, including the effects of potential changes in trade and immigration policy, as well as strong consumer demand," the minutes show.
- The minutes acknowledge that a number of businesses had indicated to some Fed officials that they "would attempt to pass on to consumers higher input costs arising from potential tariffs."
The big picture: President Trump has threatened (and in the case of China, put into place) across-the-board tariffs on imports from countries the administration determines has unfair trade practices.
- Trump has also issued a slew of executive orders since taking office aimed at cracking down on immigration.
Flashback: Fed chair Jerome Powell has said that higher immigration rates in recent years had helped close the gap between the high demand for workers and the supply of people available to fill them.
- The Fed no longer sees the labor market as a source of inflation, as the minutes showed.
Catch up quick: The Fed kept interest rates on hold at the conclusion of its meeting last month, buying more time to assess how inflation evolves in the months ahead.
- Data since that meeting showed 2025 kicked off with hotter-than-expected price pressures.
- Market-based odds published by the CME show overwhelming bets that the Fed keeps rates steady through June.
What to watch: Fed officials have cited heightened uncertainty around the economy, which has so far stayed healthy.
- But gaming out the impact of Trump's policies — trade, immigration, taxes and more — and how the mix of them nets out for inflation and growth is difficult.
- For instance, Fed officials also cited some upside risks to the economic policy, including a "potentially more favorable regulatory environment for businesses," the minutes show.
