Trump’s Tariffs ‘Highly Likely’ To Boost Inflation, Says Fed Chair Powell

1 year ago 27

Topline

Tariffs will probably worsen inflation, Federal Reserve Chairman Jerome Powell said Wednesday, echoing widespread warnings about the impact of President Donald Trump’s trade policies, and crucially indicating tariff-related price increases may complicate the Fed from pursuing further interest rate cuts.

Federal Reserve Chairman Jerome Powell delivers remarks at a news conference following the FOMC's ... More March meeting.

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Key Facts

“Tariffs are highly likely to generate at least a temporary rise in inflation,” Powell said in prepared remarks at the the Economic Club of Chicago.

That would put the Fed in the “challenging scenario in which our dual-mandate goals are in tension,” nodding to the yoyo the Fed operates between in ensuring stable prices and a stable labor market, which would likely face vulnerability if the U.S. enters an economic downturn amid tariff-based uncertainty.

Powell signaled the central bank is prepared to take a wait-and-see approach on pursuing the interest rate cuts yearned for by Trump and many others, explaining: “For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”

Crucial Quote

“Our role is to make sure this will be a one-time increase in prices and not something that turns into an ongoing inflation process,” Powell said in a moderated discussion Wednesday.

Stocks Fall On Powell’s Remarks

Stock market losses accelerated after Powell struck a cautious tone. The Dow Jones Industrial Average dropped 710 points, or 1.8%, on the day by mid afternoon, while the S&P 500 fell 2.5% and the tech-heavy Nasdaq declined 3.6%. About half of all three indexes’ daily declines followed Powell’s afternoon speech. “Markets are struggling with a lot of volatility,” said Powell.

This is a breaking news story and will be updated.