Federal Reserve officials have been cautious about lowering interest rates, with many citing concerns that tariffs—particularly under President Trump’s trade policies—could fuel inflation. However, new data from the private sector suggests that this long-standing assumption may no longer hold.
On Wednesday, the Federal Reserve Bank of Atlanta released its latest business inflation expectations survey. The results were a surprise to many at the central bank. Businesses now expect inflation to increase by just 2.2 percent over the next 12 months—just above the Fed’s target of two percent, and well within the range considered stable.
These inflation expectations are nearly identical to levels seen before President Trump reintroduced tariffs during his first administration. Importantly, they are also lower than inflation forecasts made during the early stages of the Fed’s rate-cutting cycle under President Biden, when consumer prices were climbing rapidly and confidence in monetary policy was eroding.
The credibility of this survey stems from its source: the businesses themselves. Unlike academic forecasts, these projections come from decision-makers who must set prices, pay wages, and manage supply chains. These firms understand how their vendors and customers react to tariffs, giving them real-world insight into how trade policy affects costs. If they are not forecasting inflation, it suggests that fears of tariff-driven price hikes may be overblown.
This data offers vindication to the Trump administration, which has prioritized economic nationalism and affordability for American families. It also undermines arguments that tariffs inherently lead to rising prices. If businesses across sectors are not seeing inflationary pressure from trade policies, the Federal Reserve’s reluctance to cut rates may be based on outdated assumptions.
With inflation expectations stabilizing and the economy showing resilience, the Fed may soon face mounting pressure to pivot—especially if it wants to support domestic industry without being held back by flawed inflation fears.
