The Optimal Monetary Policy Response to Tariffs
Seminarios online
Monday, April 7, 2025
The Optimal Monetary Policy Response to Tariffs
Javier Bianchi
Speaker: Javier Bianchi
Co-author: Louphou Coulibaly
Affiliation: Federal Reserve Bank of Minneapolis
Date and time: Wednesday, April 9, 2025, 14:30 (Santiago, GMT-03:00)
Location:
- Auditorio at the Central Bank of Chile, Morandé 115, second floor.
- Online meeting
Registration: seminarios@bcentral.cl
Abstract: What is the optimal monetary policy response to tariffs? This paper explores this question within an open-economy New Keynesian model and shows that the optimal monetary policy response is expansionary, with inflation rising above and beyond the direct effect of tariffs. This result holds regardless of whether tariffs apply to consumption goods or intermediate inputs, whether the shock is temporary or permanent, and whether tariffs address other distortions.