The tariffs imposed by US President Donald Trump could accelerate inflation and slow the economy, Fed Chairman Jerome Powell said on Friday, Interfax-Ukraine reports.
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At the same time, Powell noted that the Federal Reserve will not revise interest rates until there is a clearer understanding of the consequences of the changes introduced.
The Fed faces “an extremely uncertain outlook” because of the new tariffs announced by the president on Wednesday, Powell said in an appearance before business reporters in Arlington.
While he said the U.S. economy remains strong, Powell highlighted the potential threat from tariffs and stressed that the Fed's priority remains containing inflation.
“We are in an advantageous position to await greater clarity before considering any adjustments to our stance. It is too early to say what the appropriate path for monetary policy would be,” the Fed chief said.
Powell noted that the announced tariffs were significantly higher than expected.
“The same is likely to be true for the economic effects, which will include higher inflation and slower economic growth. The size and duration of these effects remain uncertain,” he said.
Powell said the tariffs would likely cause at least a temporary increase in inflation, although the effects could be longer lasting.
Let us recall
The Finance Ministry wrote that Donald Trump called on the Federal Reserve to lower interest rates a few hours after the US Central Bank kept them at the same level following its March meeting.
Following the second meeting in a row, the Federal Reserve kept the interest rate on federal loan funds in the range of 4.25-4.5% per annum. At the same time, the Central Bank raised the inflation forecast (PCE index) in the United States for 2025 to 2.7% from the 2.5% expected in December.
The median forecast among Fed policymakers still calls for a total of 50 basis points of rate cuts through the end of 2025.
Powell noted that the Fed's baseline scenario assumes that raising import tariffs will only have a short-term impact on inflation. That's what happened when Trump began raising tariffs in his first term, he said.
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