Trump's barrage of tariffs may provoke a reaction from the Federal Reserve that the new president does not like.

The elected president has promised to impose comprehensive tariffs on imported commodities after taking office. During his first term, researchers at the Federal Reserve envisioned a similar scenario and concluded that inflation would accelerate, but it would not last long. Since tariffs are ultimately seen as a drag on the economy, they believe that lowering interest rates is the best remedy.

However, there are two major obstacles to taking this approach now. First, the Federal Reserve has not fully curbed the surge in the cost of living following the pandemic. Second, the Federal Reserve previously misjudged inflation as merely a 'temporary phenomenon' and has therefore faced severe criticism. Thus, Powell and his colleagues are unlikely to ignore rising prices based on 'temporary factors' this time.

The result is that any signs of inflation rising due to tariffs could lead the Federal Reserve to raise interest rates, which is exactly what Trump hopes to avoid.

Justin Weidner, an economist at deutsche bank, stated that even if price increases are perceived as merely temporary, they could prompt the Federal Reserve to raise interest rates or at least remain unchanged, rather than significantly lowering them as would happen without a trade war.

'This is definitely very tricky news for the central bank,' Weidner said. 'They will have to confront the actual rate of inflation. They might avoid using terms like 'transitory' or 'temporary,' but they could say something like 'inflation is elevated due to tariff impacts,' clearly stating that tariffs are driving inflation, not necessarily demand.'

On the first day in office, tariffs were raised.

After reaching a 40-year high in 2022, the inflation rate in the usa has significantly eased towards the federal reserve's target of 2%. However, core inflation indicators show that prices in many regions are still above normal levels.

The current environment is vastly different from the years before the pandemic, when federal reserve officials were concerned about inflation being too low. The tariffs during Trump's first term were relatively small and targeted, and did not have a significant impact on changing the price outlook.