Boston Fed paper says strong productivity blunted tariff inflation impact

Over the last year and a half or so, Trump’s tariffs have played a starring role in the debate over inflation and how the Fed should manage this situation via monetary policy.

After price pressures surged due to COVID-19-related disruptions and expansive government support policies, inflation had been moving back to target as Trump returned to the White House at the start of 2025. His import tax increases became one of the key factors that started a resurgence of inflation, in the view of many Fed officials and private sector economists.

Over recent months, central bank officials have tied above-target levels of inflation to the ongoing impact of the tariffs even as they have expected the impact of the levies to fade, along with higher energy prices tied to the Iran war.

Also buoying inflation has been the build out of the nation’s tech infrastructure boom. The investment in artificial intelligence that has been driving tech spending is hoped by many to be a force that ultimately lowers inflation pressure at some point in the future.