- Federal Reserve Chair Jerome Powell retreated from his earlier “transitory” inflation outlook, warning that President Trump’s “significantly larger-than-expected” tariffs could lead to “more persistent” inflation and slower growth.
- Powell emphasized uncertainty, stating, “It is too soon to say what will be the appropriate path for monetary policy,” as the Fed assesses the tariffs’ unclear size and duration.
- Trump intensified pressure on Powell via social media, demanding rate cuts with posts like “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” while Powell signaled no rush to act.
Federal Reserve Chair Jerome Powell shifted his tone on Friday, stepping back from his earlier view that inflation spurred by President Trump’s new tariffs would be a fleeting issue, instead cautioning that the economic fallout could linger due to trade duties that have ballooned beyond expectations. Speaking at an event in Arlington, Va., Powell highlighted the uncertainty clouding the Fed’s next moves, stating, “It is too soon to say what will be the appropriate path for monetary policy,” while acknowledging that the tariffs are “significantly larger-than-expected.” This marks a departure from last month’s press conference, where he described tariff-driven inflation as “transitory” in his base case, a stance now overshadowed by the possibility of “more persistent” effects on prices and growth.
Trump, meanwhile, ramped up his public campaign against Powell, taking to social media to demand immediate rate cuts, posting, “This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates,” and urging, “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” The president’s jab, accusing Powell of being “always ‘late’” and playing political games, underscores a growing tension as Trump pushes for looser policy to offset the tariffs’ economic sting. Powell, however, remained measured, emphasizing that while tariffs are “highly likely to generate at least a temporary rise in inflation,” their full scope – both in size and duration – remains unclear, leaving the Fed in no rush to act amid a swirl of unknowns.
The Fed chair’s latest remarks reflect a sobering reality: the tariffs’ heft could drag on the economy longer than anticipated, with Powell noting, “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.” This dual threat – stubbornly elevated prices paired with a growth slowdown – complicates the central bank’s delicate balancing act. Powell’s pivot from a transitory outlook to one where inflation has the potential to be “more persistent” signals a Fed grappling with a shifting landscape, where Trump’s trade policies could force a rethink of monetary strategy. For now, the central bank holds its ground, wary of premature moves as it weighs the tariffs’ uncertain but potentially lasting imprint against Trump’s vocal pressure for relief.
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