Federal Reserve Chair Jerome Powell warned that inflation is likely to pick up due to President Donald Trump’s sweeping tariffs, which could remain elevated if not addressed. The 10% tariff on all US imports set to take effect this Saturday, with even higher tariffs slated for April 9, is expected to generate at least a temporary rise in inflation.
Powell stated that the outlook is highly uncertain, with risks of both higher unemployment and higher inflation. If the effects of Trump’s tariffs are more persistent, it could lead to “stagflation,” a toxic combination of stagnant economic growth and rising unemployment coupled with accelerating inflation.
The Fed has adopted a holding pattern on interest rates, waiting for inflation to slow further. However, economists project consumer prices, especially for cars, to rise higher this year due to the tariffs. Trump’s tariffs have triggered a global stock-market sell-off and increased global recession odds at 60% if kept in place.
Powell said the Fed would need to tackle the challenges posed by stagflation head-on, similar to what they did in the 1970s. The central bank is tasked with maximizing employment and stabilizing prices, making it a difficult situation for officials.
“We’re going to need to wait and see how this plays out,” Powell said.
Source: https://edition.cnn.com/2025/04/04/economy/jerome-powell-fed-tariffs-jobs/index.html