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.

Legendary investor Warren Buffett made a rare comment on President Donald Trump’s tariffs, saying punitive duties could trigger inflation and hurt consumers.

“Tariffs are actually, we’ve had a lot of experience with them. They’re an act of war, to some degree,” said Buffett, whose conglomerate Berkshire Hathaway has large businesses in insurance, railroad, manufacturing, energy and retail. He made the remarks in an interview with CBS News’ Norah O’Donnell for a new documentary on the late publisher of the Washington Post, Katharine Graham. 

“Over time, they are a tax on goods. I mean, the Tooth Fairy doesn’t pay ’em!” Buffett said with a laughter. “And then what? You always have to ask that question in economics. You always say, ‘And then what?'”

This marks the first public remark from the 94-year-old “Oracle of Omaha” on Trump’s trade policies. Last week, Trump announced that the sweeping 25% tariffs on imports from Mexico and Canada will go into effect March 4 and that China will be charged an additional 10% tariff on the same date. China has vowed to retaliate.

During Trump’s first term, the Berkshire chair and CEO opined at length in 2018 and 2019 about the trade conflicts that erupted, warning that the Republican’s aggressive moves could cause negative consequences globally.

When asked about the current state of the economy by CBS, Buffett refrained from commenting on it directly.

“Well, I think that’s the most interesting subject in the world, but I won’t talk, I can’t talk about it, though. I really can’t,” Buffett said.

Buffett has been in a defensive mode over the past year as he rapidly dumped stocks and raised a record amount of cash. Some read Buffett’s conservative moves as a bearish call on the market and the economy, while others believe he’s preparing the conglomerate for his successor by paring outsized positions and building up cash.

Market volatility has ramped up as of late as concerns grew about a slowing economy, unpredictable policy changes from Trump as well as overall stock valuations. The S&P 500 is up just about 1% this year.