Fed chair Jerome Powell voiced significant concerns during a Friday conference regarding the latest tariff measures implemented by President Trump’s administration, suggesting these policies could potentially trigger increased inflation and decelerate American economic growth.
During his address in Arlington, Powell emphasized that the impact of the newly announced tariffs this week has proven to be “much greater than expected” and they are “very likely” to result in a temporary — possibly extended — surge in inflation. “Our responsibility is to ensure that a one-time increase in prices does not turn into a persistent inflationary problem,” he stated, as reported by Reuters.
These statements indicate that the Federal Reserve might maintain its benchmark interest rate around 4.3% in the upcoming months. However, financial markets are currently projecting up to five rate reductions before year-end, an estimate that has been adjusted upward following President Trump’s Wednesday announcement of new trade taxes, Reuters reports.
Powell acknowledged the uncertainty surrounding these measures’ complete economic impact. “We have to wait and see, including for us,” he stated during the subsequent Q&A session, advocating for prudence during this uncertain period.
Simultaneously, President Trump continues his campaign for interest rate reduction, pointing to favorable conditions including decreasing inflation and falling energy prices. On Truth Social, the president wrote: “This is the PERFECT time for Jerome Powell to lower the rates. LOWER THE RATES, JEROME, AND STOP PLAYING POLITICS!”
Leading economists have expressed serious concerns about the potential repercussions of President Trump’s administration’s new tariffs, warning of possible economic slowdown, reduced employment, and increased price pressures. The Federal Reserve faces a challenging decision: either support growth through rate cuts or control inflation by maintaining or potentially increasing rates. The latter appears unlikely given President Trump’s well-documented opposition to high interest rates. He has repeatedly expressed intentions to replace the Federal Reserve president with someone more aligned with his directives, regardless of their economic merit.
Powell’s statements coincide with global market turbulence triggered by America’s new trade policies, which have prompted Chinese retaliation and significant stock market declines. Several U.S. market indices have experienced substantial drops following President Trump’s tariff increase announcement.
“The Fed is in a delicate position, with inflation ready to rise again while the economy shows signs of slowing,” Kathy Bostjancic, economist at “Nationwide,” told Reuters.
Nevertheless, the Federal Reserve president maintains an optimistic outlook. Powell highlighted the current strength of the American economy, particularly noting robust employment figures. The Labor Department’s Friday report showed 228,000 new jobs created in March. However, Reuters noted these statistics predate the new tariff announcements and may not reflect upcoming economic tensions.
