"The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth," Federal Reserve Chair Jerome Powell reacted to President Donald Trump's tariff hikes.
Powell made the remarks while addressing the Economic Club of Chicago on Apr. 16.
Powell added that the tariffs are highly likely to cause a rise in inflation, at least temporarily. But it could also be more persistent.
Avoiding a long-term inflationary effect will depend on the impact of the tariff hikes, the time it takes for prices to change, and keeping longer-term inflation expectations well anchored, the Fed chair said.
Powell also commented on strong imports during the first quarter ahead of the tariff hikes. There is elevated uncertainty about the outlook due to policy concerns, he added.
Related: Trump Tariff Live Updates: China now faces up to a 245% tariff on imports to the U.S.
The Fed's obligation is to make sure that "a one-time increase in the price level does not become an ongoing inflation problem," Powell said.
Powell added that the Fed will wait for greater clarity before mulling any adjustments to its policy stance. It means that the central bank isn't thinking of any immediate cuts in interest rates.
The Fed chair added that despite the recent uncertainty, the U.S. economy is still in a solid position. However, growth and overall consumer spending have slowed down in the first quarter of 2025. While job growth has slowed relative to last year, nonfarm payrolls grew 150,000 jobs a month in the quarter, he remarked.
Powell also said that inflation has significantly eased from its pandemic highs of mid-2022 without any "painful rise in unemployment."
Note that Powell is under pressure from President Donald Trump to cut rates. On Apr. 7, the president said that "there is NO INFLATION," and the "slow moving Fed" should cut rates.
As reported earlier, the Consumer Price Index (CPI) in March stood at 2.4%. Though lower than expected, it was still higher than the Fed’s target of 2%. We are still to know of the impact of tariff hikes on inflation in April.
Powell’s tenure at the Fed ends in May 2026. The White House is preparing to begin interviews for a new chairman, Treasury Secretary Scott Bessent said on Apr. 14.
Bitcoin gets disappointed, slips to $84,200
The crypto market reacted sharply to the disappointment around no potential immediate interest rate cuts as Bitcoin fell from above the $85,300 level to only slightly above $83,500 within an hour.
As per Kraken's price feed, Bitcoin was trading at $84,253.84 at press time. Most of the leading cryptocurrencies slipped 1%-2% within an hour.