That followed Chair Jerome Powell’s remarks last week that officials aren’t in a rush to lower borrowing costs as policymakers pause easing to see further progress on inflation. The potential for increased tariffs complicates that outlook.

One thing that’s clear: The Fed will take its time to assess the impact of Trump’s policies. San Francisco Fed chief Mary Daly said Tuesday that the US economy is in a good position, and that the central bank can afford to be thorough in its assessment.

“We don’t need to be preemptive” in our decision making, Daly said, adding that the job of bringing inflation down to 2% isn’t finished yet.

“The Fed needs to be alert to the inflation risks stemming from proposed tariff policies,” according to Seema Shah, chief global strategist at Principal Asset Management. “While central banks typically look through one-off increases from tariffs, they must be mindful of the risk that inflation expectations start to drift higher.”

Across the Atlantic, the extent of any trade response may be key if Trump unleashes tariffs. For now, policymakers have downplayed them as a price driver in either direction.

European Central Bank President Christine Lagarde has argued she isn’t “overly concerned” about importing inflation and BOE Governor Andrew Bailey has said tariff effects aren’t straightforward to predict.

Euro-area inflation unexpectedly accelerated in January, while selling-price expectations rose to the highest level in almost a year for services, and the strongest in nearly two years in manufacturing.

Consumers and professional forecasters are less sanguine than policymakers, raising their 2025 inflation outlook in ECB surveys. And a Bloomberg poll showed a majority of economists is now more concerned about price pressures exceeding 2% in the medium term.

Even some officials are getting wary. Chief Economist Philip Lane warned on Wednesday that “friction” in global trade could muddy the inflation outlook, and “new upside risks” could emerge. His Executive Board colleague Piero Cipollone pointed to a recent rise in energy costs as a reason for prudence. Offering some comfort is an ECB gauge of future wage increases that continues to signal a sharp slowdown.

In the UK, a BOE survey of small, medium and large businesses flagged elevated pay growth and output costs for the year ahead. A separate report on Wednesday showed one in four of services firms raised prices at the start of 2025 amid rising wage bills.

After kicking off a tightening cycle last year, Brazil’s central bank is now warning that inflation will run above its tolerance range for the next six months. Chile’s central bankers, meantime, have said inflation risks have increased, leaving all options on the table.

Even in Asia, where prices are largely back within target ranges, issues persist. In Indonesia, headline consumer prices fell the most in 20 years in January due to a government electricity subsidy, but core inflation picked up more than expected and the central bank has been forced to intervene to prop up the rupiah.

South Korea’s consumer inflation accelerated in January on the back of higher energy and food prices, data showed on Wednesday. And in Japan — where the return of price increases is welcome after decades battling deflation — nominal wages rose at the fastest pace in nearly three decades in December, supporting the Bank of Japan’s latest rate hike decision and keeping the bank on track for further tightening steps.

In Australia, financial markets and economists are predicting the central bank will finally embark on an easing cycle on Feb. 18, having kept the cash rate at a 13-year high of 4.35% since November 2023. But James McIntyre, who covers Australia and New Zealand for Bloomberg Economics, cautions against taking a cut for granted as the labor market remains strong and consumers are still spending.

To be sure, China remains in a period of deflation, with weak domestic demand fueling cheaper exports and less investment at home. The prospect of a deepening trade war has economists expecting additional stimulus moves to offset the potential drag on exports.

“We should never forget that the world’s second-biggest economy, China, continues to wallow in quasi-deflation,” said Gilles Moec, chief economist at AXA Investment Managers. “Given the share of Chinese products in world trade, this should be a source of global dampening in tradable goods prices.”

While there’s still a lot of uncertainty around US tariff levels, their timing and potential retaliation, it’s clear that it’ll not only pressure prices but also weaken growth globally. A few weeks ago, the Bank for International Settlements even warned of stagflation, a relatively rare mix of persistent high inflation, weak labor markets and tepid growth.

As for the US itself, Aditya Bhave, an economist at Bank of America, cautions that both the backdrop and Trump’s measures aren’t the same as they were during his first term in office.

“The concern here that maybe makes it a little bit different from 2018-2019 is that we’re in a very different environment in terms of inflation,” he told Bloomberg Television. “There’s probably more willingness to pass costs on — and also this time, at least for now, the tariffs have also been applied to consumer goods.”

--With assistance from James Hirai, Anna Edwards and Guy Johnson.

(Updates with comments from ECB’s Cipollone in 18th paragraph.)