Federal Reserve officials are concerned about the impact of President Trump's trade policies on economic growth. Despite this, they are cautious about immediately implementing interest rate cuts because they anticipate that the tariffs will lead to higher inflation. St. Louis Fed President Alberto Musalem and Minneapolis Fed President Neel Kashkari view tariff-induced price increases as risky and not to be disregarded by central bankers as temporary.

Both policymakers express worries that the expected rise in prices due to tariffs, along with retaliatory actions from other countries, could result in lasting inflation that would necessitate tighter monetary policy. This poses a dilemma as slowing growth could lead to higher unemployment, which the Fed typically addresses through looser monetary measures.

The recent Fed meeting minutes from March reveal concerns about the challenging trade-offs that may arise if inflation remains persistent while growth slows down. Following market fluctuations and concerns about a potential recession, Trump announced a shift in tariff actions which led to a surge in U.S. stocks and a retraction of predictions regarding aggressive Fed interest rate cuts.

Fed policymakers emphasize the need to adopt a wait-and-see approach due to uncertainty surrounding the Trump administration's policies and their consequences. Richmond Fed President Thomas Barkin likens the current situation to driving in dense fog, cautioning against sudden actions without a clear understanding of the circumstances.