10
Loading video...
By Gabe Whisnant
News Editor
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Federal Reserve Chair Jerome Powell warned Friday that the Trump administration's sweeping new tariffs are likely to drive up inflation and slow economic growth.
In written remarks, Powell said the economic impact of the tariffs is "significantly larger than expected" and predicted they are "highly likely" to cause at least a temporary spike in inflation—though he acknowledged the effects could prove more lasting.
"Our obligation is to ensure that a one-time increase in the price level does not evolve into a persistent inflation problem," Powell said during a speech in Arlington, Virginia.
Read More on U.S.
...
Why It Matters
Powell's emphasis on controlling inflation suggests the Fed is likely to hold its benchmark interest rate steady at around 4.3 percent in the near term. That stance could frustrate investors on Wall Street, many of whom had anticipated as many as five rate cuts this year—a number that has grown since President Trump announced the tariffs on Wednesday.
What to Know
Economists warn the tariffs could dampen economic growth, slow hiring, and increase consumer prices. That puts the Fed in a difficult position: it could cut interest rates to support growth or keep them elevated to rein in inflation. Powell's remarks suggest the central bank will prioritize price stability, even if growth slows.
The new tariffs, which have triggered retaliatory moves from China and roiled global markets, are already sending shockwaves through the economy. Stock prices in the U.S. and abroad have taken a hit, and uncertainty about the future may cause businesses to pull back on investment and hiring.
Still, there was a silver lining in Friday's jobs report: employers added 228,000 jobs in March, signaling continued strength in the labor market. However, the unemployment rate ticked up slightly to 4.2 percent, and the data reflect hiring before the full extent of the tariffs was known.
What People Are Saying
Powell said during a question-and-answer session Friday: "There's a lot of waiting and seeing going on, including by us. And that just seems like the right thing to do in this period of uncertainty."
Kathy Bostjancic, chief economist at Nationwide, told the Associated Press: "The Fed is in a tough spot with inflation set to accelerate and the economy poised to slow."
Ahead of Powell's remarks on Friday, President Trump posted on Truth Social: "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!"
What Happens Next
Economists warn that the tariffs could slow economic growth, put jobs at risk, and drive up prices. In response, the Federal Reserve might consider cutting interest rates to support the economy, holding them steady, or even raising them to contain inflation. However, based on Powell's recent remarks, the Fed appears likely to prioritize controlling inflation above all.
Reporting by the Associated Press contributed to this story.
Update: 4/4/25, 11:51 a.m.: This story has been updated with additional information.
Update: 4/4/25, 1:26 p.m.: This story has been updated with additional information.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines