Consumers Are Pulling Back, Spooked by Tariff-Related Price Increases
As central bankers weigh the possibility of President Trump's tariffs reigniting inflation, major companies are foreshadowing price increases and warning that shoppers are tightening their wallets.
Executives at several companies that sell popular consumer products, like toys and wet wipes, this week pointed to signs of a pullback in spending. The comments came against a backdrop of plunging consumer sentiment as many companies have said that they intended to pass the cost of tariffs onto customers.
Signs of slower spending and higher prices pose a challenge for the Federal Reserve, given its dual responsibility for keeping employment steady and inflation stable. Cutting rates could help address an economic slowdown, but the potential inflationary effect of tariffs have made officials cautious. The central bank is widely expected to keep interest rates steady on Wednesday.
'Having both firms and consumers saying prices are going to go up is not a good combination for the Fed,' said Diane Swonk, the chief economist at KPMG. 'It's yet another thing keeping them from doing anything with interest rates until they get more clarity on what the actual impacts are.'
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