Economists forecast that the tariffs will weaken the economy, possibly threaten hiring, and push up prices.
The Trump administration’s expansive new tariffs will likely lead to higher inflation and slower growth, and the Federal Reserve will focus on keeping price increases temporary, Fed Chair Jerome Powell said Friday.
Powell said that the tariffs, and their impacts on the economy and inflation, are “significantly larger than expected.” He also said that the import taxes are “highly likely” to lead to “at least a temporary rise in inflation,” but added that “it is also possible that the effects could be more persistent.”
“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.
Powell’s focus on inflation suggests that the Fed will likely keep its benchmark interest rate unchanged at about 4.3% in the coming months. That is likely to disappoint Wall Street investors, who now expect five interest rate cuts this year, a number that has increased since President Donald Trump announced the tariffs Wednesday.
