Federal Reserve Governor Michael Barr said the Trump administration’s trade policies could put the US central bank in a difficult position by generating persistent inflationary pressures and higher unemployment.

The Fed held rates steady amid strong labor and sticky inflation, signaling caution as trade risks loom. Learn why the Fed remains in wait-and-see mode.

The Fed operates with a dual mandate of keeping the labor market healthy while maintaining stable prices. At the moment, the labor market remains solid and inflation, while not at the 2% annual level the Fed desires, has come down significantly. That could change if some of the more aggressive Trump tariffs take effect.