Tariffs Lifted Goods Prices, NY Fed Finds
Researchers at the Federal Reserve Bank of New York concluded that tariffs imposed by the Trump administration raised consumer goods prices by 2.9 percentage points between early 2025 and February of this year. Without those import taxes, the researchers said, goods prices would have declined. The analysis drew on price movements across 67 groups of consumer goods that feed into the Consumer Price Index.[S1][S2][S3][S4][S5][S6][S7]
The study estimated that after one year, consumer goods prices increase by roughly 0.25% for each percentage point rise in average tariffs. It also described how the effects unfold over time: import prices absorb nearly the entire tariff in the first month, while indirect channels build more gradually as higher input costs and weaker competitive pressure lead domestic producers to raise prices. A full year passed before consumers felt the complete impact of the import taxes imposed early last year.[S1]
Inflation Expectations Climb as Price Pressures Persist
Stubborn cost increases — stemming from U.S. import duties at their steepest level since the 1930s, plus a spike in fuel prices tied to war — have soured how households judge affordability and fueled beliefs that inflation is set to speed up. According to the University of Michigan's Friday release, the expected inflation rate a year ahead climbed to 4.7%, versus 4.6% in September. Joanne Hsu, director of the university's consumer surveys, noted that this reading sits well above the 3.4% seen in February, before the Iran conflict erupted, and above every 2024 figure.[S1]
Longer-term inflation expectations also edged up 0.1 percentage point this month to 3.5%, compared with 3.4% last month, and remain well above the 2.8% to 3.2% range seen in 2024, Hsu said. She noted that expectations over both time horizons rose for a second consecutive month to their highest levels since May. Federal Reserve officials watch inflation expectations closely because they believe such views can become self-fulfilling. Surveys by the Conference Board and the New York Fed last month likewise showed households anticipating greater price pressures.[S1]
Fed Official Warns on Expectations; Voters Weigh Costs
In a Thursday speech, Fed Governor Christopher Waller voiced worry that the recent pickup in inflation — arriving after what will soon be five and a half years beyond the Federal Open Market Committee's 2% goal — might prompt households, investors and businesses that set prices to lift their expectations for future inflation. Recent survey results suggest growing inflation expectations and affordability concerns could shape how people vote in the Nov. 3 midterm elections. Cost of living tops the list of worries for most Republicans and Democrats alike, and a Reuters/Ipsos poll released Friday found 78% of Americans fault President Donald Trump's policies for prices rising faster than their pay.[S1]
