Fed's Bostic (Retiring) says businesses in surveys say they expect to roll more tariff costs into prices this year and strategies to avoid that have run out

• There is a risk that above target inflation will become the public's expectation.
• Tariff impacts on prices will eventually flow through, and the possible trajectory afterwards will be back to 2%.
• Difficult to know the fallout from the SCOTUS tariffs, it will raise questions about how pricing standards could change.

• US economy has remained remarkably resilient.
• 2.2% GDP for the year is a pretty strong number, given disruptions around trade and other issues.
• Any growth above around 1.8% suggests upward pressure on prices.
• Not hearing too many labour market concerns, appears the economy is at something of a plateau.
• Forecasts growth of 2.4% in 2026, 2.1% and 2027 and then at trend in 2028.

• Prudent for policy to remain mildly restrictive.
• Thinks neutral is 25-50bps below the current rate.
• Rate hikes would have to be on the table in the scenario that inflation moved the wrong way.

Fed's Bostic highlights that businesses expect to pass on tariff costs to consumers, indicating inflation pressures could persist. This may shift public expectations around inflation beyond target levels, complicating the Fed's monetary policy stance and supporting the case for potential rate hikes if inflation trends worsen.