• Fed Official Warn’s inflation could temporarily rise to 5%.
• Says long -term tariffs can lead to a sharp increase in unemployment.
• Says negative effects on jobs and outputs can last much longer.

Washington: A senior US central bank’s official has warned that interest rates may need to be reduced more sharply than expected if President Donald Trump’s steep tariffs on imports remain in place for a long period of time as they risk slowing the economy and raising unemployment.

Trump revealed sweeping tariffs in early April against most US trading partners in an attempt to tackle practice that Washington finds unreasonable, including a 10 percent global tax and higher country -specific prices, especially in China.

The higher rates of countries other than China have been pause for 90 days, but would have pushed the effective average US tariff rate to 25 percent.

Even with the break, the overall average still remains about 25 percent due to the high tariffs imposed on Chinese goods.

If this level is maintained for some time, “economic growth is likely to slowly review and increase unemployment significantly,” Federal Reserve Governor Christopher Christopher Waller told an event in Missouri on Monday, according to a copy of his prepared comments.

Waller expects elevated inflation to “would be temporary” but noticed that it could rise as high as five percent in the short term, saying that the effects “on output and employment could be prolonged”.

“If the slowdown is significant and even threatens a recession, I would expect to favor cut FOMC’s political rate before, and to a greater extent than I had thought before,” he said, referring to Fed’s interest rates.

He added that with a quick slower economy in this scenario, the risk of recession would probably offset the risk of escalating inflation.

The US Central Bank has had the interest rate stable 4.25 to 4.5 percent since the start of this year.

On Friday, the Trump administration temporarily excluded products such as smartphones, laptops and chip making equipment from the “mutual tariffs”, which provided a postponement of 10 percent global rate and 125 percent tax on goods from China.

But many others are back, including a previously 20 percent duty on imports from China over its alleged role in the fentanyl supply chain, and charges on steel and aluminum imports.