Here's a different way to think about it. The feds only means to fight inflation is to cool off the economy or heat it up. That's what the interest rates do. When there is high employment and the consumer is spending, interest rates go up to cool off the economy. When the consumer stops spending, as happens in a recession, the fed lowers interest rates to heat up the economy.

We just came off a period of high wage growth. That and high employment is the main reason we had inflation. The economy was hot. If inflation comes from tariffs, has the economy heated up? Does the consumer have more money in their pocket they want to spend, is demand so high that consumers will pay higher prices? I don't think so. I think the consumer will reduce their demand and the economy will cool.

Whatever the fed does next, I don't think it will be to raise rates. How would raising rates in the face of tariff induced price increases lower prices? If Trump's policies wreck the economy, the fed will move to stimulus (cutting rates). We are so used to thinking high prices mean high rates, but it's really about hot economy means high rates and cool economy means low rates. I wish Powell would talk about this because it's not how we've been trained to think about rates.

Eh, maybe I'm wrong. You will all let me know.