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Staff report points to tariffs and sticky services as drivers of recent inflation
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Summary
Staff told the FOMC that recent upticks in inflation reflect rising goods prices linked to tariffs and sticky core services; staff cited Cavallo et al. estimating tariffs added about 0.7 percentage points to headline CPI over six months and Yale Budget Lab estimates for goods/durables.
A staff presenter told the Federal Open Market Committee that recent inflation upticks have multiple drivers, with tariff pass-through and sticky services prices prominent among them.
The presentation noted that goods prices, which had been declining last year, have begun to rise "likely reflecting tariff induced price pressures and the unwinding of prior overstocking by suppliers," and cited research: "Cavallo et al estimate that tariffs have added 0.7 percentage points to the headline CPI in the 6 months ending in August," the presenter said. The staff also referenced Yale Budget Lab work showing core goods and durables were materially above pre‑2025 trends.
Staff emphasized that core services inflation remains sticky (around 3%), driven by strong consumer demand and elevated labor costs, and that these service-price dynamics, combined with possible additional tariff actions, could keep price pressures elevated for longer.
Context and limits: Presenters noted that some measures of longer-term market inflation expectations remain near target (5‑year, 5‑year breakevens near ~2.4%), but that short-term consumer survey expectations have risen. The transcript records staff citing academic and Fed research for the tariff and sectoral claims; the meeting excerpt does not contain independent validation or committee votes on policy tied specifically to tariff remediation.
