Federal Reserve Chair Jerome Powell said Friday that the Trump administration’s new tariffs are expected to result in higher inflation rates and slower economic growth, with the Fed focusing on mitigating prolonged price increases.
The big picture: Powell highlighted that the impact of tariffs on the economy and inflation was more significant than initially anticipated, emphasizing the likelihood of a temporary inflation spike but also the potential for persisting effects.
- The Fed is inclined to maintain its benchmark interest rate at around 4.3%, a move that might disappoint investors anticipating rate cuts following Trump’s tariff announcements.
- Economists predict that the tariffs could weaken the economy, impact hiring prospects, and drive prices higher, potentially leading to rate cuts by the Fed to stimulate economic growth or keeping rates steady to combat inflation, with Powell’s emphasis mainly on managing inflation.
Driving the news: Powell’s comments follow President Trump’s recent tariff implementations, which have caused disruptions in the global economy, provoked retaliatory measures from China, and triggered stock market declines.
