Powell: Trump Tariffs May Fuel Inflation, Slow U.S. Econ. Growth/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Federal Reserve Chair Jerome Powell warned Friday that President Trump’s sweeping new tariffs are likely to raise inflation and slow U.S. economic growth. Powell said the Fed will focus on preventing short-term price increases from becoming long-term inflation. His remarks suggest the central bank may hold interest rates steady despite economic uncertainty.
Powell Warns Tariffs Could Slow U.S. Growth – Quick Looks
- Trump’s new tariffs are “larger than expected”, says Fed Chair Jerome Powell
- Fed expects a rise in inflation, possibly temporary—but could be longer lasting
- Powell signals no near-term rate cuts, despite Wall Street hopes
- Tariffs create economic uncertainty, complicating Fed’s monetary policy
- Inflation and slower growth make it harder for the Fed to act decisively
- Job market still strong, with 228,000 new jobs added in March
- Unemployment rises slightly to 4.2%, suggesting possible cooling
- Fed likely to keep benchmark rate at 4.3%, focusing on inflation control
Powell: Trump Tariffs May Fuel Inflation, Slow U.S. Econ. Growth
Deep Look
Federal Reserve Chair Jerome Powell issued a stark warning Friday about the potential economic fallout from President Donald Trump’s newly announced tariffs, stating they are likely to drive up inflation and slow U.S. growth. Speaking from Arlington, Virginia, Powell emphasized that the Fed’s priority will be preventing these price increases from becoming entrenched.
In prepared remarks, Powell said the economic impact of the tariffs is “significantly larger than expected” and described the import duties as “highly likely” to cause “at least a temporary rise in inflation.” He also acknowledged the possibility that inflationary pressures could persist longer than anticipated, complicating the Fed’s already delicate task of balancing growth and price stability.
“Our obligation is to ensure that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said, indicating the central bank will stay vigilant in the months ahead.
The Federal Reserve’s current benchmark interest rate stands at about 4.3%. Powell’s focus on controlling inflation strongly suggests the Fed is unlikely to cut rates in the near term — a move that many Wall Street investors had been banking on. Before the tariff announcement, markets were pricing in as many as five rate cuts this year. That outlook now appears increasingly unlikely.
Powell’s comments follow Trump’s Wednesday announcement of sweeping new tariffs on a wide range of foreign goods, a move that has already triggered retaliation from China and sent shockwaves through global financial markets. U.S. stock indexes have plummeted since the announcement, reflecting investor concern over trade tensions and rising economic risks.
Economists warn that the combination of higher prices and slower growth puts the Fed in a particularly difficult position. Under normal circumstances, central banks lower interest rates to boost a weakening economy or raise them to tame inflation. But with both inflationary pressures and economic risks rising at the same time, the Fed must strike a difficult balance.
“The Fed is in a tough spot with inflation set to accelerate and the economy poised to slow,” said Kathy Bostjancic, chief economist at Nationwide. “They may have little room to maneuver.”
Despite these challenges, Friday brought some positive economic data. The Labor Department reported that the U.S. economy added 228,000 jobs in March, beating expectations. However, the unemployment rate ticked up to 4.2% from 4.1%, a possible sign of cooling momentum in the labor market.
Powell cautioned that the jobs data may not fully reflect the impact of the tariffs, as the survey was conducted in mid-March — before the full scale of the new import duties became public. He added that the increased uncertainty created by the tariffs could discourage businesses from investing and hiring, further weakening growth in the months ahead.
Businesses now face a murky economic outlook: rising input costs, shifting global trade relationships, and little clarity on how long the new tariffs will remain in place. Powell did not rule out future rate cuts, but made clear the Fed’s current focus is on preventing temporary price hikes from developing into a broader inflation trend.
The Trump administration has defended the tariffs as necessary to protect American jobs and industries, especially in manufacturing. President Trump has acknowledged that consumers may experience “some pain” in the short term but insists the long-term benefits will be worth it. Powell’s remarks, however, underline the risk that the pain could extend further than anticipated — and with fewer economic tools available to cushion the blow.
As the economic effects of the tariffs begin to ripple through supply chains and markets, all eyes will remain on the Fed for clues about its next moves. For now, Powell’s message is clear: the Federal Reserve’s fight against inflation will take priority, even as growth slows.
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