Fed Officials Warn on Labor Slowdown, Diverge on Tariff Inflation Risk

Federal Reserve officials intensified their warnings that the U.S. economy is losing momentum, highlighting a softer labor market and the uncertain inflation impact of import tariffs. San Francisco Fed President Mary Daly said the job market "has softened" and that any further weakening would be "unwelcome," adding that the recently imposed 145% tariff on Chinese goods is unlikely to push inflation persistently higher in a way that would demand an immediate policy response. Atlanta Fed President Raphael Bostic struck a more cautious tone a day later, saying businesses are still in “wait-and-see” mode on hiring and that tariffs are likely to put upward pressure on consumer prices for six to 12 months. Bostic expressed skepticism that the price effects will be temporary, arguing that the breadth of corporate pricing strategies suggests the episode could last longer than many expect. The remarks widen the debate inside the Fed after policymakers last week voted to leave the benchmark rate unchanged. With unemployment edging up to 4.2% in July and inflation still above the central bank’s 2% goal, Daly, Bostic and other officials have signaled that rate cuts later this year may be necessary if hiring continues to cool while price pressures persist.