By Howard Schneider ST. LOUIS (Reuters) - U.S. economic growth will likely slip "materially" below trend and the unemployment rate will rise over the year as firms and households adjust to prices driven higher by new import tariffs, St. Louis Fed President Alberto Musalem said. "I don't have a baseline of recession," Musalem said in an interview with Reuters, but "I'm thinking growth is probably going to come in materially below trend," which he estimated at around 2%. "You're getting risk on both sides materializing," with higher-than-anticipated tariffs putting pressure on prices as declining confidence, a blow to household wealth from the recent sharp drop in equity markets that could depress spending, and the impact of higher prices, all combining to slow growth, Musalem said. How monetary policy responds will depend on how inflation and unemployment evolve in coming months, whether the price shock appears to be persistent, and whether inflation expectations remain consistent with the Fed's 2% inflation target, said Musalem, a voter this year on interest rate policy. He called anchored expectations "a necessary, but not sufficient condition" for the Fed to reach its 2% inflation target. "We have...tension now between our two objectives going forward," Musalem said, referring to the Fed's goals of keeping unemployment low and inflation stable. "My own posture is going to be very vigilant going forward about those two types of risks," and maintaining a "balanced approach" as long as inflation expectations don't threaten to rise. Higher prices from tariffs could lead to a one-time price shock that the Fed could largely look through in setting policy, though Musalem said he regarded that approach as "risky." Likewise changes in financial conditions and household wealth matter more the longer they are sustained, with the possibility still out there that high tariffs may be negotiated lower over time and markets recover. But Fed officials are becoming more concerned that the expected price increases from the tariffs as announced, along with retaliation by other nations, could potentially translate into more persistent inflation that would require tighter monetary policy; slowing growth, on the other hand, could possibly raise unemployment, a situation the Fed would otherwise want to counter with easier monetary conditions. That situation, potentially forcing a choice about which goal to emphasize at the expense of the other, is among the more challenging for central banks, a point policymakers including Fed chair Jerome Powell have been highlighting in recent remarks and particularly since President Donald Trump on April 2 unveiled tariffs beyond what investors and Fed officials anticipated.