Inflation could prove sticky while prices might pick up again, Federal Reserve Governor Adriana Kugler warned, signaling that the U.S. central bank should keep interest rates steady for the time.

“I’m actually quite concerned about some of the persistence in inflation that we have been seeing,” she told CNBC’s Silvia Amaro during a fireside chat at the Conference on Monetary Policy Transmission and the Labor Market on Friday.

She pointed to a recent acceleration of inflation expectations, which she said she watches closely for their effect on how businesses set prices and how workers negotiate wages. This in turn means they could feed back into inflation.

Several recent data points have indicated concerns from consumers about prices increasing, with the latest Consumer Confidence Index from the Conference Board showing 12-month inflation expectations jumped to 6% in February, up from 5.2% the prior month.

“I have been one of those who has supported strongly any policy that really keeps inflation expectations well anchored. And I think that’s critical, and it has served us well,” Kugler said.

Looking ahead, the Fed’s Kugler indicated that prices could also rise again.

“I think you know there is reason to believe, potentially, that there could be price increases and more persistent inflation,” she said, adding that higher prices could come from “some of the policies that maybe are being considered and some that have already been put into place.”

Such policies could also impact economic activity, Kugler noted.

“We need to probably take account of some of this persistence that I mentioned, because of different categories of prices, because of inflation expectations, and potentially because some of the new policies that are ahead of us,” Kugler said.

Touching on the frequently changing developments surrounding the U.S. administration’s decision to impose tariffs on goods imported from key trading partners, including negotiations and potential retaliatory moves, the Fed’s Kugler said there was still “considerable uncertainty.”

Analysts and economists have widely indicated that they expect potential tariffs, and any reciprocal measures to bump prices higher for countries on both sides of the measures.

In prepared remarks Kugler gave at the conference, she likewise warned of inflation risks also weighing in on the outlook for interest rates from the Fed.

“Given the recent increase in inflation expectations and the key inflation categories that have not shown progress toward our 2 percent target, it could be appropriate to continue holding the policy rate at its current level for some time,” she said in the address.

The Fed has cut interest rates three times since September, for a combined full percentage point, before holding steady in January. The bank’s overnight borrowing rate currently sits in a range between 4.25%-4.5%.

According to CME Group’s FedWatch tool, traders were last pricing in a 97% chance of the central bank also leaving rates unchanged when it next meets later this month. The picture then appears to become less clear, with an around 63% likelihood of rates also being held at the Fed’s May meeting, before tipping toward a rate cut in June.

Global market volatility and geopolitical turbulence in the wake of President Donald Trump’s return to the White House have led to warnings that the U.S. economy could be heading for a recession — but economists say that a downturn isn’t in the cards just yet.

“I don’t think we will talk about a U.S. recession. The U.S economy is resilient, I would say, largely despite Donald Trump,” Holger Schmieding, chief economist at Berenberg Bank, told CNBC’s “Squawk Box Europe” on Monday.

Dubbing Trump an “agent of chaos and confusion,” Schmieding said the president’s “zigzagging on tariffs shows that he has little idea of the potential consequences of his tariff policies.”

Nonetheless, “U.S. consumers have money to spend, [and] they probably will. The labor market in the U.S. remains reasonably firm, and with energy prices coming down a bit and probably some tax cuts and deregulation coming, I don’t think there’s an imminent recession risk,” according to Schmieding.

“But what is becoming ever clearer in the long run, Trump is hurting U.S. trend growth, that is growth in the years beyond 2026. And he stands for higher prices for U.S. consumers, which means, in my view, the Fed [Federal Reserve] has no reason to cut rates with Trump as president, and Trump sowing chaos and confusion,” he noted.

CNBC has contacted the White House for a response and is awaiting a reply.

International stock markets have been rocked to their foundations in recent weeks amid fears that Trump intended to revive a global trade war after announcing hard-hitting import tariffs on goods from China, Mexico and Canada.

Confusion and uncertainty have followed, as the president last Friday announced that there would be a reprieve and delay to April 2 on some tariffs on the U.S.’ neighbors and closest trading partners.

Trump’s unconventional approach to trade and international diplomacy has left markets unimpressed, with U.S. indexes whipsawing, while strategists warned that negative market sentiment was bound to continue in the Trump 2.0 era. U.S. stock futures fell earlier Monday morning, indicating another rocky ride for American markets at the start of the new trading week.

Business leaders and economists have voiced concerns that tariffs will lead to further inflationary pressures on the U.S., with consumers likely to bear the brunt of higher prices on imported goods.

They also warn that investment, jobs and growth could suffer, as consumers tighten their belts and hunker down to wait out a period of economic unpredictability and potential “stagflation” marked by high inflation and high unemployment.

That would put pressure on the Fed to keep interest rates on hold, rather than cutting from their current benchmark rate in a range between 4.25%-4.5%, in a bid to stimulate the economy. Lower interest rates can fuel more spending, and, in turn, inflation.

Fed Chairman Jerome Powell on Friday said that the central bank can wait to see how Trump’s aggressive policy actions play out before it moves again on interest rates.

Recent economic data showing consumer confidence has taken a hit in February will be food for thought for the Trump administration. The Federal Reserve Bank of Atlanta’s GDPNow tracker of incoming metrics also indicated last week that the U.S. gross domestic product could shrink by 2.4% for the period between January and March. A technical recession is defined as taking place when at least two consecutive quarters log negative growth.

Last week’s jobs data also showed that while the U.S. labor market is still expanding, signs of weakness could also be starting to creep in. Nonfarm payrolls data indicated employment growth was weaker than expected in February and while jobs growth is still stable, the data comes amid Trump’s efforts to cut the federal workforce.

Nonfarm payrolls increased by a seasonally adjusted 151,000 on the month, exceeding the downwardly revised 125,000 of January, but coming in below the 170,000 consensus forecast from Dow Jones, the Labor Department’s Bureau of Labor Statistics reported Friday. The unemployment rate edged higher to 4.1%.

TS Lombard’s chief U.S. economist, Steven Blitz, said the latest jobs data “tell us the economy continues to grow” and did not signal “increased recession risks created by the array of Trump’s policies.”

However, he said in a note Friday that “the sum of Trump’s actions can yet skew the economy in any which way, including an implosion of capital spending.”

“Keep in mind that presidents have been known to accept downturns in year one of their presidency. It is a free pass, they blame the previous president and take credit for the recovery. My base case is still growth and the Fed holding still. My base concern comes from the capital markets side, break trade and you will break the capital inflows that support the economy,” Blitz said.

Trump has refused to rule out the possibility of a recession this year, but insisted this weekend that the economy was in a “period of transition.”

Asked about the Atlanta Fed’s warning of an economic contraction on Fox News Channel’s “Sunday Morning Futures,” Trump seemed to acknowledge that his tariff plans could affect U.S. growth.

“I hate to predict things like that,” he said in an interview aired Sunday, when asked if the recession warning was a concern.

“There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.” The White House leader added, “It takes a little time. It takes a little time.”

JPMorgan’s U.S. Market Intelligence unit last week noted that the U.S. economy was entering “another period of uncertainty” given the unpredictable nature of tariffs. The analysts said they were taking a “bearish” position on U.S. stocks, expecting markets to see more volatility and for U.S. growth to potentially “crater.”

“We have already seen the negative impact that policy/trade uncertainty has had on both household and corporate spending, so it seems likely that we see a larger magnitude of this over the next month. Keep an eye on the unemployment rate, layoffs, WARN notices, etc. If we start to see the unemployment rate rising rapidly, then that likely which push the market back into the ‘Recession Playbook,'” JPMorgan noted.

While a U.S. recession was not the bank’s base-case scenario, JPMorgan analysts warned that “the undetermined length of tariffs and the potential for the trade war to see an acceleration in new tariffs [means] we think stocks will be challenged as U.S. GDP growth estimates are cut.”

“Given the lack of a potential end to this escalation, the expectation is that tariffs of these magnitude with drive both Canada and Mexico into a recession. Look for U.S. GDP growth expectations to crater and for earnings revisions to be materially lower, forcing a re-think of year-end forecasts. With this in mind, we are changing our view to Tactically Bearish,” they noted.

Alicia Love typically purchases the most popular beans for Coffee Labs Roasters in a one-year deal with her coffee importer. But at the end of last year, prices were so high that she decided to wait the market out.

Instead, prices climbed even higher. With supplies running low, she signed a purchase order for a three-month supply, and hopes that prices will soon ease.

“At the time I thought, should we wait to sign this new deal?” Love, an owner of the Tarrytown, New York, business, told CNBC. “I’m kicking myself in the butt now for not doing it then.”

The initial deal would have cost Love roughly $4 per bag, which is for either 130 pounds or 152 pounds, depending on the variety. The three-month deal she just signed was for roughly $5 per bag.

The skyrocketing cost of coffee comes as egg prices are also rising without any end in sight. Both products are pillars of an American breakfast, which has long been one of the cheaper meals to eat either at home or on the go. The quickly escalating prices means consumers are changing their habits and businesses are scurrying to react.

In the latest consumer price index report, Bureau of Labor Statistics data showed the price of eggs in the U.S. up 53% year over year. But the pace of gains has been rapid. From December to January, the average cost of a dozen spiked 15%, per FRED data. In the week ended March 3, a 7% week-over-week increase brought average prices above $8 a dozen, JPMorgan Chase said.

While egg production is suffering from a devastating avian flu outbreak, which has resulted in the culling of millions of hens. Some say the consolidation of the industry is exacerbating the problem. On Friday, the Wall Street Journal reported that the U.S. Department of Justice opened an investigation into antitrust practices that might be at play.

Coffee, meanwhile, is also reaching record-high prices. A dry spell in Brazil, which has hit crop yields, is largely at fault. Over the past 12 months, futures prices have more than doubled. Last month, coffee prices on the Intercontinental Exchange surpassed $4 per pound for the first time ever.

“I’m hoping that we just have stability in the market. It’s very challenging to navigate the volatility, and the consumers are going to struggle with that,” said Andrew Blyth, coffee trading operations manager at Royal New York. “You can’t have menu prices changing once a month, especially for something as … routine as coffee.”

Consumers have gotten the message. Morgan Stanley said in a Wednesday note that its survey of consumer sentiment signaled the first negative reading since June 2024. This follows the University of Michigan’s own survey from February that showed consumers expect inflation to get worse in the near term.

Breakfast as a whole was already stretching consumers wallets in recent years, according to Robert Byrne, senior director of consumer research at Technomic’s food service segment.

“Speaking of breakfast more broadly, over the past few years we have seen affordability ratings for family-style chains (IHOP, Cracker Barrel, Denny’s, etc.) under greater pressure than what is reported across other restaurant segments,” Byrne said, in an interview.

That’s caused diners to shift their behavior, Byrne said.

“Breakfast is the easiest to either replace with something simple from home or even skip altogether,” Byrne said. He added, a recent Technomic survey found, on average, consumers use some type of foodservice for breakfast roughly 1.2 times per week.

“With inflation impacting all consumers – even affluent diners are pulling back on frequency – the thought is consumers are skipping other types of occasions and instead saving up for a weekend splurge, which probably is a dinner,” he said.

Technomic’s research also shows consumers are walking away from more routine breakfast orders at quick service options like Dunkin’ or McDonald’s. Byrne said, when they do go now, it’s often either an “impulse” order or a substitute for a splurge at a restaurant.

The impact is being felt across the restaurant industry. Dine Brands, the parent of breakfast staple IHOP, has seen its stock pull back more than 13% this year and shares hit a 52-week low on Wednesday after providing a disappointing 2025 outlook. The majority of analysts polled by FactSet maintain a hold rating.

“For IHOP … we’re expecting sort of low to mid single-digit inflation cost for the year. And that’s really primarily – it’s really driven by eggs,” Dine Brands Chief Financial Officer Vance Chang said on the company’s earnings call. “Outside of that, I think there’s some headwinds with bacon and coffee as well.”

Dine Brands expects domestic same-store sales for IHOP to be in the range of down 1% to up 2% for fiscal 2025.

Facing similar pressures, Waffle House and Denny’s recently imposed a surcharge for menu items containing eggs as opposed to a straight up price hike. Byrne said such a move may be more bearable for consumers because it’s assumed the surcharge is a temporary increase. McDonald’s has held the line and said the company will not implement an egg surcharge.

“My sense is that consumers may appreciate that it is noted as a temporary surcharge rather than a blanket price increase, as this implies that prices will return when the situation changes,” Byrne said. “On the flip side, printing menus is expensive and an operator may not be in a position to do so quickly.”

Restaurant stocks have well underperformed the market over the past year. McDonald’s is an outlier with a 10% gain over the past year, but Denny’s stock has plummeted more than 55% and Cracker Barrel has fallen 38% over the same period.

More bad news could be coming for coffee drinkers. Coffee Labs’ Love said some decaffeinated coffee travels back and forth over the U.S. border and could be impacted by proposed tariffs.

She explained that if a roaster is using a washing method to decaffeinate their coffee, the mountain water used in the process comes from Mexico, but pre-roasted beans can be sent to Canada for processing. This means President Donald Trump’s tariffs on Mexico and Canada could add a new layer of price pressures.

“This cost will show across the board ,” Love said. “The Canada tariff will make decaf coffee cost a lot more on top of the already high price.”

Blyth is less sure that decaf coffee will be hurt by the White House’s trade policy, but signaled there is still a lack of clarity.

“As of now we don’t believe it would incur a tariff, but we just don’t know yet. Hopefully there is more guidance in the coming days to help navigate the unknowns,” Blyth said.