New York Fed President John Williams on Tuesday said in remarks at a Washington conference that “the tariffs have overwhelmingly been borne domestically.”

He elaborated that “tariffs have already meaningfully increased U.S. prices of imported goods, and the full effects have likely not yet been felt.”

The study Williams cited found that as much as 90% of the added cost from tariffs has been passed on to domestic producers and consumers. Trump administration officials had insisted exporters would absorb the costs.

Trump economic advisor Kevin Hassett suggested the researchers should be “disciplined” for what he called “the worst paper I’ve ever seen.”

Schmid Warns On Inflation’s Human Cost

Kansas City Fed President Jeff Schmid struck a harder line at an event in Denver.

“Though I believe our credibility on inflation remains intact, I don’t think we can be complacent, and the costs of losing that credibility are high,” Schmid said. Inflation has been above the Fed’s objective for nearly five years.

“Inflation affects, in a really severe way, the bottom half of our wage earners, and I want to stay really sensitive to that,” he added.

“AI might be necessary to offset the drain on growth from a smaller workforce,” Schmid said. But based on current inflation, he noted the economy isn’t there yet.

Prediction market traders dumped their June rate cut bets as the two Fed officials talked tough on inflation and tariffs

The Polymarket contract tracking a Fed rate cut by the June meeting collapsed to 38%, down from 60% at the start of the month.

Why June Matters

The June FOMC meeting would likely be Kevin Warsh’s first as chair. Fed Chair Jerome Powell‘s term expires May 15, at which point Warsh would take over assuming he has been confirmed by the Senate.

Traders are betting on which version shows up in June: the ‘Old Warsh’ who was among the Fed's fiercest hawks, or a new, more dovish chair aligned with the White House’s mandate for cuts.

Energy prices have spiked everywhere, with European gas doubling in 48 hours as the war in the Middle East continues, adding to inflation concerns.

If energy prices remain elevated, Warsh may struggle to deliver the rate cuts Trump has demanded; the same mandate that likely got him the nomination in the first place.

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