00:00 Speaker A
Federal Powell has said that his base case scenario is that any inflation from tariffs could prove transitory. But we’ve heard from some of your colleagues at the Boston Fed and the St. Louis Fed, who are worried about potential long-lasting effects for inflation. Uh, St. Louis Fed president Alberto Musallam brought up the notion of domestic producers increasing prices in concert with importers. We also know that we’re going to see tariffs on intermediate goods that could ripple through the supply chain. So how are you thinking about the potential for prolonged effects when it comes to inflation and tariffs?
00:50 Speaker B
Well, you’ve highlighted a number of channels where you could get more prolonged effects. So the example that you gave about uh intermediate inputs. Uh those, you know, uh increase costs for American producers. It takes some time for those to get into consumer prices and and show up in inflation. So there’s definitely a channel that past history teaches us may take a few years to be fully uh uh kind of, you know, seen in the data. Uh but there’s other, you know, questions out there or or how does it spill over to other uh goods and services in the economy? So I would say it’s still early days and to be able to come to a concrete you know, concrete conclusion around this. I think one is, yes, we will see tariffs affect prices. And then we’ll just have to keep watching how do those cascade into prices, you know, downstream to other goods uh in the economy? What do we see the effects on on kind of other goods uh being produced in the US? And and really have an open mind about how long these last in terms of their effects on inflation and on the economy.
02:28 Speaker A
You said it could take a couple of years for this to filter through. So do you think this is going to be slow moving or some people have said it could be fast moving?
02:41 Speaker B
Well, I think it it will be both. Uh so I think the answer to a lot of your questions is really yes, because I think all of these things will happen. One is, on consumer goods, I think the history there is you see pretty strong pass through that happens pretty quickly. Uh but still might, you know, depending on the market, you know, businesses might take their time in changing their prices. So that may take a matter of months or so. It’s really in these intermediate inputs or maybe indirect effects that I think that the effects might not be felt uh maybe for a couple years uh fully uh felt. So I think we have to watch kind of all these channels. So the way I view it is we need to be really looking at the granular data and understanding what is having direct effects on on tariffs on prices, but also some of the indirect effects that might uh filter through the broader economy.