According to BNY’s Geoff Yu, the New York Fed’s latest Liberty Street Economics analysis highlights that many US firms continue to plan tariff-related price increases, signaling persistent inflation pressures that are significant for the US Dollar (USD) and Federal Reserve (Fed) policy decisions [1]. The analysis, based on regional business surveys, reveals that nearly half of companies directly paying tariffs anticipate further price hikes, with some planning to implement these increases six months or more into the future [1]. Specifically, about 47% of service firms and 44% of manufacturers that pay tariffs expect additional tariff-driven price hikes [1].
The New York Fed notes that gradual pricing strategies, fixed contracts, and ongoing policy uncertainty are extending the adjustment process, which could result in tariff-driven inflationary pressures persisting longer than many policymakers had anticipated [1]. Despite the Fed minutes not significantly altering hawkish rate expectations, the analysis suggests that the most reliable path to lower inflation remains weaker demand—a scenario that offers little reassurance for equity markets [1].
Additionally, the report points out that markets remain highly sensitive to supply shocks, a fact recognized by the Fed and its global peers [1]. Recent energy market volatility has already contributed to tighter financial conditions, potentially reducing the necessity for the Fed to further reinforce the case for additional rate hikes [1].
CONCLUSION
The New York Fed’s findings indicate that tariff passthrough is likely to keep US inflation elevated for longer, complicating the Federal Reserve’s disinflation efforts. With nearly half of tariff-paying firms planning further price hikes and ongoing market sensitivity to supply shocks, the outlook for inflation and monetary policy remains uncertain.