Fed meeting notes rising inflation and unemployment risks as of May meeting

Fed staff acknowledged at their last meeting that they could face a "difficult trade-off" between rising inflation and rising unemployment in the coming months, according to newly released notes from the Fed's May meeting. The outlook was bolstered by Fed officials' projections of an increased risk of recession. A simultaneous rise in inflation and unemployment would force commissioners to decide whether to prioritize tightening monetary policy to fight inflation or to support growth and employment by cutting interest rates. As the economy adjusts to higher import taxes proposed by the Trump administration, "almost all participants said inflation could be more persistent than expected". The Fed expects inflation to rise "significantly" this year as a result of the tariffs, while the labour market is "expected to weaken substantially", with the unemployment rate rising above the long-term expectation of full employment by the end of the year and remaining there for two years.