Fed's Williams says tariffs boost U.S. inflation, weigh on growth

Zurich (May 14) - Tariffs imposed by President Donald Trump on Chinese goods in the escalating trade war between the two countries will boost U.S. inflation and could dampen economic growth, a top Federal Reserve policymaker said on Tuesday.

The U.S. economy is now in "a very good place" with low unemployment and recovering business and consumer confidence, President of the Federal Reserve Bank of New York John Williams said.

"When I look at first-quarter data there are mixed messages there, but ...in terms of retail sales, consumer spending, and other economic indicators and importantly employment growth, the economy has rebounded pretty solidly after a bit of a soft patch late last year and early this year," he told Bloomberg TV.

U.S. tariffs already imposed on Chinese goods had increased prices slightly and slowed growth, said Williams, who is vice chairman of the Fed's rate setting committee.

"As tariffs get larger, assuming that happens, the effects will be bigger, boosting inflation in the next year and probably having negative effects on growth," Williams said after an event in Zurich.

"We could probably get a couple tenths or two tenths on the inflation rate over the next year based on what has already been announced. If there (is) further escalation in terms of tariffs, those effects would get even larger."

Reuters