Former Fed President: How Will Fed Prevent 'Economic Fallout'? | Jeffrey Lacker

Summary

Jeffrey Lacker, former Richmond Fed president, discusses the trade war's impact on inflation, growth, the labor market, and Fed policy. He sees a recession as more likely than not, expects the Fed to hold rates in May, and warns that tariff uncertainty clouds the data. He also assesses Treasury market intervention risks and the dollar's reserve-currency status.

• Lacker says the March CPI print showed little direct tariff impact so far, but trade-war uncertainty is creating a fog over the data.
• He views a U.S. recession as more likely than not, driven by tariff implementation and uncertainty hitting business and consumer spending.
• He expects the Fed to stay on hold in May and wait for more clarity before adjusting policy.
• He sees cross-cutting effects on Treasuries, with weaker growth lowering short/medium yields while inflation and fiscal stimulus pressure the long end.
• He says the Fed would likely intervene in the Treasury market if liquidity deteriorates significantly, similar to March 2020.
• He believes the dollar's reserve-currency status is not under imminent threat, but persistent market whipsaw could erode it over time.
• He argues U.S. protectionism may push other countries into new trade blocs and that China-specific national-security measures would be more targeted than broad tariffs.
• The interview closes with personal Fed anecdotes and a lesson in humility about economic policy.