Federal Reserve Governor Michael Barr said on Tuesday that higher import levies will likely put upward pressure on prices that may not be temporary, suggesting he is not rushing to cut interest rates.

"I expect inflation to rise due to tariffs," Barr stated during an event in Omaha, Nebraska aimed at gathering feedback on Fed policy and economic conditions from business and community leaders.

Barr warned that "higher short-term inflation expectations, supply chain adjustments, and second-round effects may cause some inflation persistence," while noting that tariffs could simultaneously slow economic growth and increase unemployment, which stood at 4.2% in May.

The Fed Governor emphasized uncertainty around tariff policies and their effects, stating that "monetary policy is well positioned to allow us to wait and see how economic conditions unfold."

His comments follow the Fed's decision last week to maintain short-term borrowing costs in the 4.25%-4.50% range. Fed Chair Jerome Powell reinforced this cautious approach during congressional testimony earlier on Tuesday, highlighting the central bank's "wait-and-see" stance as it evaluates tariffs' impact on inflation in coming months.

Barr's position differs from fellow Fed officials Christopher Waller and Michelle Bowman, who recently indicated they could support a July rate cut, believing tariffs would likely only create a one-time inflation increase.

"Monetary policy sometimes requires tradeoffs - a stance of policy that is necessary to lower inflation, for example, may also lower aggregate demand and slow the economy," Barr explained, adding that understanding how policy decisions affect households and businesses remains crucial to balancing economic goals.

Source: Investing.com