Fed’s Powell Warns Tariffs Could Raise Inflation, Cut Growth

Federal Reserve Chair Jerome Powell has warned that President Donald Trump’s newly implemented tariffs are likely to lead to higher inflation and slower economic growth, while stressing that it is too early for the Fed to adjust interest rates in response to recent market turbulence. Powell made the remarks during a speech to the Society for Advancing Business Editing and Writing, following a week of heightened financial market volatility and mounting concerns over a potential global recession.

“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell said.

The Trump administration’s tariff plan includes a base 10% duty on most US imports, with some goods—particularly those from China—facing total tariffs exceeding 50%. The European Union could face 20% tariffs, while China goods are subject to an additional 34% duty on top of an existing 20%. Powell emphasized that the pace and scope of these changes are creating substantial uncertainty for economic planning and forecasting.

“If we find ourselves in that situation, we look at how far each of the two variables is from its goal, and we ask ourselves, ‘How long would it take to get back?’ And we weigh those things and make a decision about what to do,” Powell explained, referring to the Fed’s dual mandate of price stability and maximum employment.

Over the past two days, the Dow Jones Industrial Average has dropped nearly 3,000 points, while the S&P 500 has fallen about 4%. Treasury bond yields have also declined sharply, reflecting rising investor fears of a downturn. Meanwhile, JPMorgan raised its forecast for a global recession to 60%, up from 40%.

Powell acknowledged that while tariffs may cause a “temporary rise in inflation,” their impact could be more persistent. “Avoiding that outcome would depend on keeping 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 prices,” he said.

President Trump, however, criticized Powell publicly just minutes before his speech, calling for an immediate interest rate cut. “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,” Trump said.

Powell declined to respond to the president’s remarks and reiterated the importance of the Fed’s independence. “We are strictly non-political. We try to stay as far as we can from the political process,” he concluded.