Jerome Powell on Tariffs, Goods Inflation, and Supply Chain Costs

Impact of Tariffs on Goods Inflation

• 📈 Goods inflation has shifted from negative or zero over the past 25 years to approximately 1.2% over the last year.
• 💡 This shift is considered a big change and is contributing an estimated 0.3% to 0.4% to the current core PCE inflation reading of 2.9%.

Cost Absorption in the Supply Chain

• 🧩 Tariffs are primarily being paid by companies between the exporter and the consumer, such as retailers or product manufacturers, rather than exporters.
• ⚠️ These intermediaries are absorbing a significant portion of the tariff costs, rather than passing them on immediately.

Delayed Consumer Pass-Through

• ⏳ Companies in the middle intend to pass through tariff costs eventually, but are not doing so currently.
• 📉 The pass-through of costs to the consumer has been slower and smaller than initially anticipated, though evidence of some pass-through is clear.