Finance

Inflation will move toward 2% target, but risks to outlook are rising, says Fed’s Musalem

Published

9 hours ago

March 3, 2025

Alberto Musalem, President and CEO of the Federal Reserve Bank of St. Louis, speaks to the Economic Club of New York, in New York City, U.S., Feb. 20, 2025.

Brendan McDermid | Reuters

WASHINGTON — The risks for higher inflation are on the rise, St. Louis Federal Reserve President Alberto Musalem said Monday.

During a keynote address at the National Association for Business Economics conference, Musalem noted that his baseline case is for inflation to gradually move toward the central bank’s 2%. This scenario requires inflation expectations to remain anchored and stable, he noted.

However, “near-term inflation expectations have risen substantially over the last few weeks, and that’s something I’m watching closely,” Musalem added.

Indeed, the February reading on The Conference Board’s consumer confidence index reflected the largest one-month drop since August 2021, as inflation expectations rise. The Institute for Supply Management’s manufacturing PMI also showed a sharp increase in prices within the sector for the month.

“Businesses and households are clearly more sensitive to expectations of higher inflation,” Musalem said. “That’s why the risks seem more skewed to the upside, but the baseline is for continued disinflation.”

Investors came into 2025 expecting the Fed to lower rates this year. However, the central bank kept rates at their current 4.25%-4.5% range after its January meeting, where it noted that inflation remained “somewhat elevated.”

The CME Group’s FedWatch tool also shows that traders are pricing in a 93% likelihood that the Fed will keep rates at their current levels.

Musalem’s remarks come as investors brace for U.S. tariffs on imports from China, Mexico and Canada — with many worried the levies will drive prices higher, thus making it harder for the Fed to ease rates going forward.

Finance

China rejects additional U.S. tariffs, vows to take countermeasures

Published

2 hours ago

March 3, 2025

Business Finance News

Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019.

Aly Song | Reuters

BEIJING — China “firmly rejects” additional U.S. tariffs on Chinese goods and will take countermeasures, the Ministry of Commerce said in a statement Tuesday.

The duties will “hurt” U.S.-China trade relations and China urges the U.S. to withdraw them, the ministry said in Chinese, translated by CNBC. Beijing has previously warned of countermeasures, but has yet to detail any.

After the first round of new U.S. tariffs in February, China’s retaliatory measures included raising duties on certain U.S. energy imports and putting two U.S. companies on an unreliable entities list that could restrict their ability to do business in the Asian country.

The White House has confirmed that new duties of 10% on Chinese goods are set to take effect Tuesday, bringing the total amount of new tariffs imposed in just about a month to 20%.

The average effective U.S. tariff rate on Chinese goods is thus set to hit 33%, up from around 13% before U.S. President Donald Trump began his latest term in January, according to estimates from Nomura’s Chief China economist Ting Lu.

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China’s state-backed Global Times reported Monday, citing a source, that Beijing was considering retaliatory tariffs on U.S. agricultural products.

U.S. exports of agricultural products such as soybeans to China account for the largest share of U.S. goods exported to China at 1.2%, or $22.3 billion, as of 2023, according to Allianz Research analysis.

Oil and gas ranked second by share at 1%, or $19.3 billion, the research showed. Pharmaceuticals ranked third at 0.8% or $15.6 billion.

China on Tuesday is also kicking off an annual parliamentary meeting known as the “Two Sessions.”

Policymakers are set Wednesday to reveal the annual gross domestic product target and fiscal stimulus plans for the year.