WASHINGTON, 12 April 2025 (BSS/AFP) – A senior US Federal Reserve official has confirmed the central bank is “absolutely” ready to intervene in financial markets should the recent volatility triggered by President Donald Trump’s aggressive tariff policies continue to rattle investors.
In a week marked by sharp swings in financial markets, Boston Federal Reserve President Susan Collins told the Financial Times on Friday that the Fed would step in if required to restore stability. Collins, a voting member of the Federal Open Market Committee (FOMC), emphasised the central bank’s readiness to act depending on market conditions.
“We would absolutely be prepared to use our tools if needed,” Collins said.
Her comments follow President Trump’s announcement on 2 April of sweeping new import tariffs across dozens of countries. While some duties were temporarily rolled back to 10% in response to market turbulence, China remains targeted with new tariffs totalling 145%, intensifying trade tensions with the world’s second-largest economy.
📊 Economic Indicators Affected by Tariff Moves
| Metric | Pre-Tariff (March) | Post-Tariff (April) |
|---|---|---|
| Year-Ahead Inflation Expectations | 5.0% | 6.7% (highest since 1981) |
| Long-Term Inflation Expectations | 4.1% | 4.4% |
| Fed’s Target Inflation Rate | 2.0% | – |
| Unemployment Rate Forecast (2025) | 4.2% | 4.5% – 5.0% |
| GDP Growth Forecast (2025) | ~2.1% (2024) | <1.0% |
Source: University of Michigan, US Federal Reserve
📉 Fed Officials Express Concern Over Inflation and Growth
Fed policymakers have become increasingly vocal over the economic risks posed by high tariffs. Collins noted in a separate interview with Yahoo Finance that inflation is now expected to rise “well above” 3% in 2025. While she does not foresee a significant recession, she acknowledged the potential for a sharp economic slowdown.
St. Louis Fed President Alberto Musalem, also a voting FOMC member, echoed similar caution in a speech delivered in Arkansas:
“I would be wary of assuming the impact of high tariffs on inflation would be only brief or limited,” he warned.
Musalem also stressed the importance of “continued vigilance” and close monitoring of incoming data as inflation risks grow and labour markets show signs of cooling.
🗣️ John Williams: US Growth to Fall Below 1%
New York Fed President John Williams went a step further, providing estimates of how Trump’s tariffs and immigration policies could reshape the US economy:
“I now expect real GDP growth will slow considerably from last year’s pace, likely to somewhat below one percent,” Williams said at a conference in Puerto Rico.
Williams also predicted the unemployment rate would rise from 4.2% to between 4.5% and 5%, and inflation could jump to 3.5% – 4%, well above the Fed’s target.
📈 Markets Brace for Fed Decision
Despite rising concerns, futures markets currently anticipate a 60% chance that the Fed will hold interest rates steady at its next meeting, maintaining the federal funds rate between 4.25% and 4.50%, according to CME Group data.
🔍 Background: Tariff Turbulence and Its Global Impact
President Trump’s tariff policies have disrupted global trade patterns since early 2025, leading to a sharp fall in investor confidence and sparking fears of retaliatory trade measures. The collapse of major trade negotiations and escalating uncertainty have unsettled Wall Street and drawn criticism from economists and industry leaders alike.
While intended to bolster domestic industries, these protectionist measures have instead raised input costs, threatened global supply chains, and heightened inflationary pressure — putting the Federal Reserve in a difficult position as it seeks to balance inflation control with economic stability.