US Federal Reserve officials are trying to determine the impact the Supreme Court's rejection of President Donald Trump's tariffs will have on inflation and interest rate decisions.
On Tuesday, the administration imposed a new 10 per cent global tariff under Section 122 of the Trade Act, where the President can impose a duty for 150 days without seeking approval from Congress.
The latest action comes after the Supreme Court said Mr Trump overextended his authority by imposing sweeping charges on most global trading partners. The court did not rule on the administration's tariffs on sectors such as aluminium or steel, nor did it provide guidance on how the administration is to refund billions of dollars that importers had paid.
Estimates on the effective US tariff rate varied amid the rulings and subsequent orders. The Yale Budget Lab forecasts the current tariff rate to be at 13.7 per cent after the Section 122 tariffs were impose, which could fall to 9.1 per cent if those tariffs expire.
Chicago Fed President Austan Goolsbee laid out what he called the “optimistic case” in the inflation impact on tariffs will be “transitory” if it has already passed through to consumers.
“If so or if the Supreme Court’s decision leads to lower overall tariff rates, we could be back on path to target inflation in the near term,” he told a conference on Tuesday.
Mr Goolsbee is considered among one of the more dovish regional Fed bank presidents who favour lower interest rates, although he is not a voting member on the rate-setting committee this year.
Markets have recently pushed back expectations on when they believe the Fed will cut interest rates again, with the next reduction expected in July, according to CME Group data. Futures markets anticipate the Fed will deliver two cuts this year to bring its target range down to 3 per cent to 3.25 per cent.
Mr Goolsbee said businesses in his district continue to face an uncertain outlook in what is shaping out to be a low-hiring and low-firing cycle, a unique phenomenon that is playing out in the current labour market.
“The question marks surrounding the impact of last week’s Supreme Court opinion on tariffs and where things go next make it feel like this dynamic may continue,” Mr Goolsbee said.
His remarks came a day after Fed governor Christopher Waller addressed the same conference, during which he suggested the court's ruling “is unlikely to have a significant impact on my view of the appropriate stance of policy”.
Still, he acknowledged “there is considerable uncertainty over to what extent tariffs will continue”.
Mr Waller, an influential voice and permanent voting member on the Fed's rate-setting body, said he would “look through” the impact of tariffs on inflation. The Fed official, who was on Mr Trump's shortlist to replace Jerome Powell as Fed Chair later this year, has advocated in recent months to lower interest rates over labour market concerns.
Government data released last week showed hiring in the US exceeded expectations in January with 130,000 jobs added.
At the same time, it showed the US economy added 181,000 new jobs in 2025, down from its previous estimate of 584,000. Mr Waller said he believes last year “was even worse than that”.
“One month is not a trend, and that is especially true after the kind of labour market that limped along in 2025,” Mr Waller said.
