Federal Reserve officials warn that inflation is the top threat

On Thursday, both Federal Reserve policymakers said they saw the current higher inflation as a more immediate risk than a slowdown in the labor market, a view that signaled support for keeping monetary policy at its current state for longer.
"At this juncture, I see greater upside risks to inflation and potential downside risks to employment and output growth going forward," said Fed governor Robert Coogler at the Economic Club of New York on Thursday. "If upside risks to inflation remain, that allows me to continue to support keeping the FOMC policy rate at its current level." Tariffs are already driving prices higher, she said, and while there are some signs that the economy is cooling, "there is no significant slowdown yet".
Later in the day, Mr. Schmid, the president of the Kansas Fed, expressed optimism that the economy would avoid recession as it has in the recent past. While the extent of the drag on growth and employment from tariffs was unclear, he also signaled that he was more concerned about the imminent impact of tariffs on inflation. "Tariffs are likely to push prices higher in the coming months," Mr. Schmid said, "by an unknown amount, and the impact" may not be fully felt for some time. "