'Transitory' is back as the Fed doesn't expect tariffs to have long-lasting inflation impacts

The Federal Reserve predicts a temporary increase in inflation this year, but expects it to be short-lived, leading to discussions about the concept of “transitory” inflation. Chair Jerome Powell stated that any price jumps from tariffs are likely to be brief, with the outlook showing inflation reaching 2.8% in 2025 before quickly receding back to 2.2% and 2% in the following years, indicating a belief that the impact of tariffs will not be long-lasting. Powell emphasized the importance of inflation expectations being well anchored, and noted that while short-term inflation indicators have risen, longer-run expectations remain stable.

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