Fed chair Powell signals caution as Trump tariffs loom over inflation outlook
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Federal Reserve Chair Jerome Powell warned on April 4 that President Donald Trump’s newly announced tariffs are likely to elevate inflation and slow economic growth. However, he also signaled that the central bank would hold off on any interest rate moves until the effects are clearer. According to Powell: “It is too soon to say what will be the appropriate path for monetary policy.” Speaking at a business journalism event in Arlington, Powell said the Fed is facing a “highly uncertain outlook” following the administration’s decision to impose sweeping 10% tariffs and steeper retaliatory duties on several major trading partners. Powell added the Fed is prepared to be patient as it assesses the fallout. He said: “Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem.” The comments come just weeks after the central bank left its benchmark interest rate unchanged at 4.25% to 4.50%, citing increased economic uncertainty. Powell’s remarks suggest the Fed is in no rush to alter its policy stance, even as financial markets increasingly anticipate rate cuts beginning this summer. According to CME Group data, market futures indicate a growing expectation that the Fed will lower rates by at least one percentage point before the end of the year. However, Powell emphasized that such expectations may be premature, particularly if inflation risks begin to rise again. While acknowledging the US economy remains “in a good place,” with low unemployment and steady demand, Powell flagged consumer concerns over inflation and noted that core inflation remains above the Fed’s 2% target, running at an annualized 2.8% as of February. Trump has publicly urged the Fed to cut rates, accusing Powell of failing to respond to declining inflation. But Powell…
Filed under: News - @ April 4, 2025 5:27 pm