Federal reserve chairman Jay Powell has warned that Donald Trump’s tariffs will stretch “the highest inflation and the slowest growth” as the president’s plans for steep taxes on US trading partners shake global financial markets.
“It is now clear that the increase in tariffs will be significantly greater than expected,” Powell said in the remarks prepared for a conference in Virginia on Friday. “The same is likely to be true for economic effects, which will include higher inflation and slower growth.”
He also stressed that the risks to unemployment, which has remained undergoing in recent months, were growing.
Powell’s remarks come after Trump’s announcement on Wednesday about a universal 10 percent fee and much larger tasks for many key trading partners has sent markets to recover. The S&P 500 of Wall Street has stayed two days of heavy sale, leaving the blue chip index on the right track for its worst week since the pandemia closed the large economy swaths in 2020.
Trump, before Powell’s remarks, said on his social platform of truth: “This would be a perfect time for Fed Jerome Powell to lower interest rates.”
Powell emphasized that “uncertainty” was high in terms of “what will be charged, at what level and for what duration, and the expansion of revenge from our trading partners”.
He said at a later press conference: “It feels like we do not need to be in a hurry. It feels like we have time”, signaling that the Central Bank is intended to maintain its main interest rate in its current interval between 4.25 percent and 4.5 percent until there is more clarity regarding the results.
Powell added: “Inflation will increase and growth will slow down, but for me it is not clear at this time what the right way for monetary policy will be.”
He also noted that “while tariffs are most likely to generate at least a temporary increase in inflation, it is also possible that the effects can be more persistent.”
