Fed Chair Says That Bigger-Than-Expected Tariffs Will Translate Into Higher Inflation

The chair of the Federal Reserve Jerome Powell said on Friday that bigger-than-expected tariffs will translate into higher inflation and slower economic growth.

How Will Americans Get Affected?

According to Powell, the Fed will offer no imminent relief from plunging markets and scrambled supply chains, a report by Axios said.

This fear of lasting inflation will make the Fed adamant about cutting rates even if the American economy falters, which will affect US citizens.

Additionally, the United States President Donald Trump said on Truth Social that "This would be a PERFECT time" for Powell to cut rates.

Powell said, "our obligation is to ... make certain that a one-time increase in the price level does not become an ongoing inflation problem."

What Is The Federal reserve Likely To Do?

The Fed is likely to keep its benchmark interest rate unchanged at about 4.3% in the upcoming months so as to disappoint Wall Street investors.

The investors of Wall Street expect at least five interest rate cuts this year, especially after the tariff announcement made by Trump's administration.

As per economists, increased tariffs have the potential to weaken the economy, threaten hiring, and push up prices, due to which the Fed may be propelled to cut rates to bolster the economy.

Powell affirmed that the mix of slower growth, inflation, and high uncertainty has put the Fed's interest rate policy on indefinite hold.

"We are well positioned to wait for greater clarity before considering any adjustments to our policy stance," he said. "It is too soon to say what will be the appropriate path for monetary policy."

What Does This Mean?

Over the course of the year, the financial markets shall be pricing in significant rate cuts, as the Fed reacts to a trade-induced economic slump. But Powell's comments indicate otherwise.

The Fed's obligation, Powell said is "to make certain that a one-time increase in the price level does not become an ongoing inflation problem."

But with elevated inflation and new tariffs, Americans are likely to lose confidence in the longer-term.

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