Sweeping tariffs rolled out by the Trump administration this week are expected to raise inflation and slow economic growth, according to Federal Reserve Chairman Jerome Powell, who indicated Friday that the Fed is likely to keep its benchmark interest rate unchanged.
WASHINGTON, DC - MAY 01: Federal Reserve Bank Chair Jerome Powell announces that interest rates will ... More
Powell described the economic impact of tariffs as “significantly larger than expected” and said import taxes are likely to lead to a jump in inflation, at least temporarily, during remarks in Arlington, Virginia.
After Trump’s tariff announcement, investors were hoping for up to five rate cuts this year to stimulate economic growth, but Powell indicated the central bank will leave interest rates unchanged at about 4.3% in the near future.
Powell’s remarks came after Trump called on him to “stop playing politics” and lower the target federal funds rate in a Friday social media post; Trump has repeatedly demanded the Fed to lower rates, despite the central bank’s political independence.
Trump’s tariffs will likely increase prices across imported goods, including cars, coffee and chocolate, while many retail brands that rely on factories in South Asian countries are expected to be impacted too, with countries like China, Vietnam and Taiwan all being slapped with tariff rates higher than 30%.
The annual rate of core inflation was 2.8% in February, still well above the Fed’s 2% target.
“Inflation is going to be moving up and growth is going to be slowing,” Powell said. “But it’s not clear at this time what the appropriate path for monetary policy will be, and we’re going to need to wait and see how this plays out before we can start to make those adjustments.”
This is a developing story and will be updated.
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