Powell Warns Trump’s Tariffs Risk Stoking Even Higher Inflation and Slower Growth

Jerome Powellfed Chair

CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!"

added Trump, who first nominated Powell to run the Fed, before turning against him during his first term

Jerome Powellfed Chair

Actual effects of the policies should then be pretty manifest and clear,

says Powell

Jerome Powellfed Chair

While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected,

said Powell

While tariffs are highly likely to generate at least a temporary rise in inflation, it's also possible that the effects could be more persistent,

he added

Jerome Powellfed Chair

This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always "late," but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months - A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!"

Ahead of Powell's remarks on Friday, President Trump posted on Truth Social

The same is likely to be true of the economic effects, which will include higher inflation and slower growth,

he said

The Fed is in a tough spot with inflation set to accelerate and the economy poised to slow,

Kathy Bostjancic, chief economist at Nationwide, said in an analyst note Friday

This would be a perfect time for Fed Chairman Jerome Powell to cut interest rates,

Trump wrote

Philip Jeffersonfed Vice Chair

If uncertainty persists or worsens, economic activity may be constrained,

Fed Vice Chair Philip Jefferson said Thursday at an event in Atlanta

We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation,

he said at an event just outside Washington, DC

We expect a significant inflationary impulse that...will likely fuel further and broader rises in inflation expectations and actual inflation itself,

they wrote

Increased downside risks to growth and a more front-loaded inflation shock should allow cuts to resume sooner than we had expected

Nomura economists led by David Seif said in a note on Thursday

Jerome Powellfed Chair

Our obligation is to ... make certain that a one-time increase in the price level does not become an ongoing inflation problem,

Powell said in remarks being delivered in Arlington, Virginia

The problem for the Fed is that they're going to have to be very reactive,

said Jonathan Pingle, chief U.S. economist at UBS

Such scenarios, with higher initial inflation and slower growth, could pose challenges for monetary policy,

she added, alluding to the challenges that the Fed would face, seeking to lower inflation without then sparking a spike in the unemployment rate

Amid growing uncertainty and risks to both sides of our dual mandate, I believe it will be appropriate to maintain the policy rate at its current level while continuing to vigilantly monitor developments that could change the outlook,

she added

And, as seen in recent years, higher prices for motor vehicles could, with a lag, raise costs for related services, such as rentals, insurance, and car repair,

she said

Tariffs on steel and aluminum have already raised prices for those manufacturing inputs,

she said