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

Federal Keep Chair Jerome Powell said Friday that he expects President Donald Trump’s tariffs to raise inflation and shame growth, and indicated that the central bank won’t move on interest rates until it gets a clearer picture on the remotest impacts.

In a speech delivered before business journalists in Arlington, Virginia, Powell said the Fed faces a “highly at a loose end outlook” because of the new reciprocal levies the president announced Wednesday.

Though he said the economy currently looks pushy, he stressed the threat that tariffs pose and indicated that the Fed will be focused on keeping inflation in check.

“Our constraint is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not evolve into an ongoing inflation problem,” Powell said in prepared remarks. “We are well positioned to wait for greater clarity first considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy.”

The remarks check ined shortly after Trump called on Powell to “stop playing politics” and cut interest rates because inflation is down.

“I cut out it a practice not to respond to any elected officials comments, so I don’t want to be seen to be doing that. It’s just not appropriate for me,” Powell communicated at the onset of a question-and-answer session following his speech.

There’s been a torrent of selling on Wall Street following the Trump advertisement of 10% across-the-board tariffs, along with a menu of reciprocal charges that are much higher for many key switch partners.

Powell noted that the announced tariffs were “significantly larger than expected.”

“The same is favourite to be true of the economic effects, which will include higher inflation and slower growth,” he said. “The size and duration of these executes remain uncertain.”

While Powell was circumspect about how the Fed will react to the changes, markets are assay in an aggressive set of interest rate cuts starting in June, with a rising likelihood that the central bank when one pleases slice at least a full percentage point off its key borrowing rate by the end of the year, according to CME Group data.

However, the Fed is forayed with keeping inflation anchored with full employment.

Powell stressed that meeting the inflation side of its mandate when one pleases require keeping inflation expectations in check, something that might not be easy to do with Trump lobbing price-lists at U.S. trading partners, some of whom already have announced retaliatory measures.

A greater focus on inflation also would be likely to deter the Fed from easing protocol until it assesses what longer-term impact tariffs will have on prices. Typically, policymakers view excises as just a temporary rise in prices and not a fundamental inflation driver, but the broad nature of Trump’s move could transformation that perspective.

“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also admissible that the effects could be more persistent,” Powell said. “Avoiding that outcome would depend on food longer-term inflation expectations well anchored, on the size of the effects, and on how long it takes for them to pass through fully to quotations.”

Core inflation ran at a 2.8% annual rate in February, part of a general moderating pattern that is nonetheless in any case well above the Fed’s 2% target.

In spite of the elevated anxiety over tariffs, Powell said the economy for now “is quiet in a good place,” with a solid labor market. However, he mentioned recent consumer surveys showing kick over the trace concerns about inflation and dimming expectations for future growth, pointing out that longer-term inflation expectations are yet in line with the Fed’s objectives.

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