Powell sees tariffs raising inflation and says Fed will wait before further rate moves

Federal Reserve Chair Jerome Powell recently made remarks indicating that President Donald Trump’s tariffs are expected to raise inflation and lower economic growth. In a speech delivered in Virginia, Powell emphasized the uncertainty surrounding the new tariffs and their potential impacts on the economy. He stressed the importance of keeping inflation in check and mentioned that the Fed will wait for more clarity before making any adjustments to its policy stance.

Despite the current strength of the economy, Powell highlighted the risks posed by tariffs and reiterated the Fed’s commitment to anchoring longer-term inflation expectations. He stated that it is too early to determine the appropriate path for monetary policy in response to the tariffs announced by the president.

Following Trump’s call for interest rate cuts due to low inflation, Powell refrained from engaging in political discussions and maintained the Fed’s independence. The president’s announcement of across-the-board tariffs has led to significant market volatility, with investors bracing for higher inflation and slower economic growth.

Powell acknowledged that the announced tariffs were larger than expected and emphasized the uncertainty surrounding their economic effects. While markets are pricing in aggressive interest rate cuts in response to the tariffs, the Fed’s primary focus remains on keeping inflation anchored with full employment.

The Fed is likely to tread cautiously in response to the tariffs, as a greater focus on inflation could delay any policy easing until the longer-term impacts are assessed. Powell mentioned that tariffs could lead to a temporary rise in inflation, but their persistence could have a more lasting effect on prices.

Despite concerns over tariffs, Powell reassured that the economy is still in a good place with a solid labor market. Consumer surveys have shown rising inflation concerns and subdued expectations for future growth, but longer-term inflation expectations remain aligned with the Fed’s objectives.

Overall, Powell’s remarks underscore the Fed’s commitment to maintaining price stability and ensuring that inflation remains in check amidst the uncertainty created by the president’s tariffs. As the Fed continues to monitor economic developments, the central bank will be poised to adjust its policy stance accordingly to support sustainable economic growth.