• Kevin Hassett, former Trump economic advisor, acknowledged getting "a little emotional" in response to New York Federal Reserve research on tariffs' inflationary effects.
  • NY Fed President John C. Williams estimates tariffs added about 0.5 percentage points to current inflation, peaking at 2.75-3% in early 2026 before declining.
  • Economic forecasts show solid GDP growth of 2.5-2.75% for 2026, driven by fiscal policy and AI investments, despite tariff drags.

Kevin Hassett's candid admission surfaced in recent commentary amid ongoing economic debates, highlighting the charged atmosphere surrounding tariff policy discussions. The former National Economic Council Director under Trump responded to Williams' January 12, 2026 speech, which analyzed how tariffs have increased U.S. import prices with their full effects still pending.

Williams' analysis suggests the burden falls mainly on domestic businesses and consumers rather than foreign producers, contributing to current inflation around 2.75%. According to people familiar with the matter, the NY Fed president's research has sparked intense discussions among policymakers about the appropriate monetary response to what he described as "one-off price effects."

Recent FOMC minutes from January 28, 2026 noted solid growth expectations for the year despite these tariff impacts, with unemployment stabilizing below natural rates. "What we're seeing is underlying inflation trends remain favorable," Williams said in his speech, pointing to declining shelter costs and stable wages as positive indicators.

Market participants are closely watching how the Fed balances employment and inflation risks amid fiscal tailwinds and regulatory shifts. The central bank implemented 75 basis points of rate cuts in late 2025, and Deloitte forecasts another 50 basis points of cuts in 2026 amid elevated longer-term rates.

Consumer surveys from early 2026 showed stable medium-term inflation expectations and slight labor market improvements, though the NY region has seen modest economic decline with layoffs and tempered business optimism according to the latest Beige Book. Attempts to reach Hassett for additional comment were unsuccessful.

Looking ahead, Williams forecasted inflation reaching the Fed's 2% goal by 2027, with GDP growth at 2.5-2.75% this year driven by what he called "favorable financial conditions and productivity gains from AI investments." The NY Fed president is scheduled to discuss policy further at the upcoming GAC 2026 conference.

Correction: An earlier version of this article misstated the timing of FOMC minutes; they were released January 28, 2026, not January 29.