Federal Reserve (Fed) Bank of St. Louis President Alberto Musalem noted on Wednesday that tariffs will make it increasingly difficult for the Fed to make short-term changes to policy rates.

Key highlights

I expect US economic growth this year materially below estimated 2% trend.

Inflation expectations remain anchored, it is necessary for the Fed to keep them that way.

Financial conditions have tightened, but I do not see market dysfunction in recent volatility.

Tension between the Fed's dual mandate goals as risks of slower growth and higher inflation begin to materialize.

Markets are responding to reassessments of global growth.

Business contacts say they are not turning to layoffs, but are taking a wait-and-see approach to hiring and capital spending plans.

We will take a balanced approach to monetary policy as long as inflation expectations remain anchored.

It is risky to assume the Fed can look through higher prices from tariffs, there is a chance some effects could persist.

Baseline outlook is not for recession, but slipping confidence, higher prices and a blow to household wealth point to slowing growth.