The Trump administration’s vast new tariffs are likely to lead to higher inflation and slower growth, and the Federal Reserve will focus on maintaining temporary price increases, Federal Reserve Chairman Jerome Powell said Friday.
The Federal Reserve Chairman’s remarks come two days after Trump announced it Sweeping Tax It overturned the global economy and was sent US stock prices. And overseas dips, investors are nervously watching as a major trading partner. China said on Friday it would impose 34% tariff on imports Of all US products that begin on April 10th, the day after Trump’s new tariffs came into effect.
In a written statement in Arlington, Virginia, Powell said the impact on tariffs and the economy and inflation was “significantly greater than expected.” He added that import taxes are likely to lead to “at least temporary rises in inflation,” but “the effect could be more sustained.”
“In the future, higher tariffs are moving forward through our economy and are likely to raise inflation in the coming quarters,” Powell said. “Our duty is… to make sure that a one-time rise in price levels does not become an ongoing inflation issue,” he added.
Powell’s focus on inflation suggests that the Fed will likely not change its benchmark interest rate to around 4.3% in the coming months. This is likely to disappoint Wall Street investors who are hoping to cut interest rates five times this year. This has been rising since President Donald Trump announced tariffs on Wednesday.
Trump on Friday in a true social post on his social media platform, urged Powell to cut his fees, and wrote that now it’s the “perfect time” to do that. The president went on to criticize the Fed’s chair as “always ‘sluggish’,” adding, “he can change his image now.”
Economists predict that tariffs will do so Weak the economypossibly threatening employment and pushing prices up. In that scenario, the Fed can either cut fees to strengthen the economy or keep it unchanged to combat inflation or even hiking them. Powell’s comments suggest that the Fed will focus primarily on inflation.
“At the Fed, we are head-on focusing on achieving the dual-mandart goals that Congress has given us the biggest jobs and stable prices,” Powell said. “Uncertainty is high and negative risks are rising, but the economy is still in a good place. Data coming in shows robust growth, a balanced labor market, and inflation is above 2%, even though it’s approaching a 2% target.”
A tricky combination
The weak growth and rising prices are a difficult combination for the Fed. Typically, central banks raise interest rates to reduce borrowing costs when growth is slow, boost the economy, slow spending and fight inflation.
“We are closely watching this tension between hard and soft data,” Powell said. “As new policies and their potential economic impacts become clearer, we will better understand their implications for economic and monetary policy.”
The government accelerated employment in March, Added 228,000 jobsThe unemployment rate has been incremented from 4.1% to 4.2%.
However, these figures measure employment in mid-March before the scope of the job becomes clear. The tariffs raised uncertainty about how the economy will operate in the coming months. This limits the company’s willingness to invest and hire.
“The Fed is in a tough place with accelerated inflation set and the economy is poised to slow down,” said Kathy Boss Jansick, chief economist across the country.
