Federal Reserve chair Jay Powell has cautioned that the tariffs imposed by President Donald Trump could lead to “higher inflation and slower growth,” causing turbulence in global financial markets.
Speaking at a conference in Virginia, Powell stated that the tariff hikes are expected to be more substantial than initially anticipated, resulting in adverse economic effects such as increased inflation and reduced growth.
He also raised concerns about the potential impact on unemployment, which has remained stable in recent months but is now facing heightened risks.
Trump’s recent announcement of a 10% universal tariff and increased duties on various trading partners has triggered significant market volatility, with Wall Street experiencing heavy selling and the S&P 500 heading towards its worst week since the onset of the pandemic in 2020.
Prior to Powell’s remarks, Trump took to his Truth Social platform to suggest that the Federal Reserve should consider cutting interest rates in response to the current situation.
Powell emphasized the high level of uncertainty surrounding the tariffs, including what products will be affected, the extent of the levies, and potential retaliation from other countries.
Indicating a cautious approach, Powell suggested that the central bank is inclined to maintain its current interest rate range until there is more clarity on the repercussions of the tariffs.
While acknowledging that inflation may rise temporarily due to the tariffs, Powell also acknowledged the possibility of more persistent effects on the economy.