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ARLINGTON, Va. (AP) – Fed Chairman Jerome Powell said Friday that widespread new tariffs from the Trump administration could lead to higher inflation and slow the U.S. economic growth rate.
Powell said tariffs and their possible impact on the economy and inflation were “significantly greater than expected”. He also said import taxes could lead to “at least temporary growth in inflation”, but added: “This impact could also be more lasting.”
“Our obligation is to … to ensure that one-time increase in price levels does not become a persistent inflation problem,” Powell said in a speech to the association.
Powell’s focus on inflation suggests that the Fed could keep its benchmark interest rate unchanged about 4.3% over the coming months, rather than cutting it soon.
Higher borrowing costs can help slow down the economy and calm inflation.
Meanwhile, Wall Street investors are now expecting to lower interest rates five times this year, a figure that has increased since President Donald Trump announced tariffs on Wednesday.
Powell also stressed that the full impact of tariffs on the economy is unclear and that the Fed will remain off-market until there is a clearer view of the economy. He admitted that many businesses said they were delaying new investments until they had a better impact on tariffs.
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“We’re waiting a lot, including us,” Powell said in the Q&A session. “This seems to be the right thing to do in this time of uncertainty.”
Trump has urged Powell to lower interest rates respectively, citing inflation and energy prices on his social media platforms to lower the truth social networking.
“This is a perfect time for Fed Chairman Jerome Powell to lower interest rates,” Trump wrote. “Low interest rates, Jerome, stop playing a political role!”
Economists expect tariffs will weaken the economy, potentially threatening hiring and pushing up prices. In this case, the Fed could lower rates to strengthen the economy, or could keep rates unchanged (even hiking) to combat inflation. Powell’s comments show that the Fed is mainly focused on inflation.
Powell’s remarks were made two days after Trump announced outright global economic tariffs, prompting China to take retaliatory actions and sending stock prices in the United States and overseas.
Powell’s description of the tariff impact was more negative than last month, when he said any inflation caused by the tariff could be temporary.
Growth and higher prices are a tricky combination of the Fed.
Typically, central banks will lower their key interest rates to lower borrowing costs and stimulate economic growth while raising interest rates (or keeping interest rates higher) to slow spending and combat inflation.
“The Fed is in a tough position, inflation will accelerate and the economy is expected to slow down,” said Kathy Bostjancic, chief economist at the national level.
The law requires the Fed to seek the highest employment and price stability, which defines it as 2% inflation per year.
Powell acknowledged that tariffs that could lead to unemployment and raise prices could make both goals difficult to achieve.
“Two goals… are in a state of tension, or they may be,” he said.
Powell said the economy and hiring remain stable for the moment, but he noted that consumers and businesses are becoming more pessimistic about the future.
He also said inflation has dropped sharply from its peak in 2022, but said it has recently “slowed” towards the central bank’s 2% target.
On Friday, the government reported that recruitment accelerated in March, adding 228,000 jobs, adding 228,000 jobs, despite the unemployment rate hitting 4.1% from 4.1%.
However, these figures were measured in mid-March before the scope of remits became clear.
Tariffs also raise uncertainty about the economic situation in the coming months, which could limit the willingness of businesses to invest and hire.
& Copy 2025 Canadian Press
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