US Federal Reserve Chair Jerome Powell will hold a press conference after the Monetary Policy Committee meeting held in the Federal Reserve in Washington, DC on March 19, 2025.
Robert Schmidt | AFP | Getty Images
Federal Reserve Chairman Jerome Powell said Friday he hopes President Donald Trump’s tariffs will boost inflation and reduce growth, indicating that central banks will not move interest rates until they get a clearer picture of the ultimate impact.
In a speech released before business journalists in Arlington, Virginia, Powell said the Fed faces “very uncertain outlook” due to the new mutual collections the president announced on Wednesday.
He said the economy now looks strong, but he highlighted the threat posed by tariffs and showed that the Fed is focusing on keeping inflation under control.
“Our duty is to fully secure long-term inflation expectations and ensure that one-time price levels rise does not become an ongoing inflation issue,” Powell said in his prepared remarks. “We are well positioned to wait for more clarity before considering adjusting our policy attitudes. It will soon be a good path for monetary policy.”
The statement comes shortly after Trump called on Powell to “stop playing politics” and cut interest rates as inflation rates declined.
Along with a much higher mutual rate menu for many key trading partners, there was a torrent of Trump selling on Wall Street following the announcement of 10% onboard tariffs.
Powell noted that the tariffs announced were “significantly greater than expected.”
“The same is likely to be true of the economic impact, including higher inflation and slower growth,” he said. “The size and duration of these effects remain uncertain.”
Focus on inflation
Powell was cautious about how the Fed would respond to changes, but CME Group data shows that central banks will likely slice at least the full points from key borrowing speeds by at least the end of the year, with the market priced aggressive interest rate cuts in June.
However, the Fed is being charged with maintaining inflation that is fixed to full employment.
Powell emphasized that inflation expectations need to be curtailed to meet the inflationary side of the mission.
Also, a big focus on inflation could prevent the Fed from easing its easing policy until it assesses what long-term influence has on prices. While policymakers usually see tariffs as merely temporary rises in prices rather than basic inflation drivers, the broad nature of Trump’s movements could change that perspective.
“Taxes are likely to produce at least a temporary increase in inflation, but the effects could also be more sustained,” Powell said. “While avoiding that outcome depends on fully fixing long-term inflation expectations, the magnitude of the effect, and the time it takes for them to pass fully to the price.”
Core inflation was run at an annual rate of 2.8% in February. This is part of a general mitigation pattern that is well above the Fed’s 2% target.
Despite growing uncertainty over tariffs, Powell said the economy is “still in a good place” for now. However, he mentions a recent consumer survey, showing growing concerns about inflation and intentional expectations for future growth, noting that long-term inflation expectations are still consistent with the Fed’s objectives.
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