Federal Reserve Chair Jerome Powell stated in a written comment that tariffs and their impacts on the economy and inflation are “significantly larger than expected.”
He also noted that import taxes are “highly likely” to lead to “at least a temporary increase in inflation,” adding that “it is also possible that the effects will be more persistent.”
“Our responsibility is […] to ensure that a one-time increase in the price level does not become a persistent inflation problem,” Powell remarked during comments made in Arlington, Virginia.
Powell’s focus on inflation suggests that the Federal Reserve may keep the interest rate steady at around 4.3% in the coming months.
Shortly before this address, Donald Trump urged the Fed Chair to cut interest rates, in a post on the platform Truth Social.
“This would be the PERFECT time for Federal Reserve Chairman Jerome Powell to cut interest rates,” wrote the Republican president, asserting that inflation has decreased in the United States since his return to power in January.
However, Powell also stated today that it was “too soon” to adjust the institution’s monetary policy because the consequences of the wave of new taxes on imported goods into the United States could not yet be assessed.
Economists predict that the tariffs will weaken the economy, possibly threaten hiring, and push up prices. In such a scenario, the Federal Reserve could cut rates to boost the economy, or it might leave rates unchanged—or even raise them—to combat inflation.
The new tariffs were imposed by the United States on all imports, with surcharges for countries considered particularly hostile to trade.
