Tariffs higher than expected; will push inflation higher: Powell

Federal Reserve Chairperson Jerome Powell

The Trump administration’s new tariffs will likely lead to higher inflation and slower growth for the US economy, Federal Reserve Chairperson Jerome Powell said, adding that the central bank will not make any changes to interest rates until the final effects are clear.

Speaking to the media in in Virginia on April 4, Powell said that the tariffs were “significantly larger than expected”.

Noting that the economy appears strong right now, but faces a threat from political development, Powell said uncertainty is high and downside risks have risen.

“It is too soon to say what will be the appropriate path for monetary policy,” the Fed chief said, adding that inflation outlook remains stable over the long term.

The reciprocal tariffs are likely to lead to a temporary rise in prices.

“More recently, progress toward our 2% inflation objective has slowed,” Powell said, adding that the Fed is not responsible for trade, immigration, or fiscal policies.

The size and extent of the economic impacts of the new policies remain uncertain, he said, while noting that the central bank is in a good position to wait for further clarity before adjusting its policy.

Powell’s remarks came shortly after Trump called on the Fed chief to cut interest rates, stressing his desire for the central bank to keep borrowing costs low to boost consumer demand.