Inflation and the Fed

It is very hard to believe that there would be no impact on price increases from the tariffs at such and horizon. Even if we are not seeing these price increases yet (which has plausible reasons), it would be reckless to make monetary policy decisions with such an assumption.

I would expect most of the effect of the tariffs on price levels to have worked through by summer 2026, but timing is uncertain and the policies may change.
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The data already suggest inflation is happening. It might stabilize by then, but given the constant changes in policy, who knows.

The ongoing process of imposing tariffs is volatile and seems likely to be contested and evolving for an uncertain period time. Moreover, even short-lived tariff-induced price shocks could un-anchor inflation expectations for a significant period of time.

could be the case.....need evidence/analysis, not assertion.

The current tariffs will affect the price level as they eventually get passed through to US consumers and firm. These effects should take place by next summer. There should be no effect on price levels in late 2026 from this round of tariffs.

If we knew tariffs were now locked down not changing this would be my assumption. But the goal posts keep moving so not sure this is a robust assumption.

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I don't know the current data on inflation well enough to judge whether this would be a good policy.

We have no good idea what tariffs will be in force between now and 2026, but have at least circumstantial evidence that tariffs can be disruptive, and so the possibility of inflationary pressure from tariffs should not be dismissed.

I see the argument that the effects will be relatively short-lived, but this statement implies that the Fed should be very confident that they will be very short-lived. Seems a bit strong.

The question is poorly posed. Tariffs are a significant tax increase, which is an adverse supply shock. Whether that impacts inflation depends on Monetary policy.

Why assume that?

Should make no such assumption, should prepare and think through responses to different possible scenarios and be data driven. Tariffs likely to have a temporary effect on inflation. Due to tradeoffs, optimal policy allowing higher inflation temporarily.
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It seems very likely that President Trump's decisions and rhetoric in general will impact US inflation, the credibility of the Fed, and US risk premium. His actions towards Lisa Cook add salt to the wound.

I believe it will raise the risk premium, but the amount is not clear.

I think it's likely to rise. By substantial, I mean 10 basis points or above.

Some of the associated risk premium has probably already been embedded in term premia. If this matter is resolved in favor of the President's ability to remove and replace a Federal Reserve Board Governor in this manner, risk premia would likely rise further,

The financial markets did nor price in any substantial increase in the inflation premium when the attempted firing was announced. There are still 11 members of the Feds monetary policy committee. But future political pressure could increase inflation expectations.

The timing is difficult to predict but this would a major encroachment on Fed independence and it will raise funding costs.

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Markets seem excessively complacent, and Governor Cook's ousting would be only one (more) step (though a very significant one) on the road to inadvisable political control of the Fed.

A forced departure would indicate a loss of Fed independence and may well lead to eroding borrower confidence and higher risk premia.

It should increase risk-premia, but, given because of the surprising pro-Trump previous decisions of the Supreme Court, it may already be mostly reflected in current prices.

I think "substantially" is too strong.

Hard to determine the effect of any one thing

I'm not confident of my expectation of how "the market's" expectation of Fed behavior would change.

Forcing an exit of a Fed official for political reasons negatively affects a huge asset: Monetary Policy Independence. Terrible signal. Less clear if it must be reflected in inflation premia (required for UNCERTAINTY)or simply in the average expected inflation rate in rates.