Federal Reserve Chairman Jerome Powell warned Wednesday that President Trump's new tariffs would likely make it difficult for central banks to lower prices.
Powell did not mention the president by name, but he told reporters Tuesday that the Fed supports import taxes to prevent the fight against inflation.
“I think once tariff inflation arrives, further progress may be delayed,” Powell said.
He noted that the new Fed economic forecast released Wednesday “doesn't show any further progress on inflation this year, and that's really due to the tariffs in it.”
Powell's comments came after the Federal Open Market Committee (FOMC), the Federal Reserve panel responsible for setting interest rates, refused to cut borrowing costs after a two-day meeting in Washington, D.C.
The Fed was widely expected to maintain stable fees despite growing concerns about the economic situation and the impact of Trump's trade agenda.
Powell describes economic uncertainty as an “abnormal rise” and poses a challenge for the Fed as it seeks to preempt potential price increases.
A New York Fed survey of consumer expectations recently showed an increase in pessimism about household financial outlook. A benchmark survey of consumer expectations at the University of Michigan fell off the cliff in February and showed that in March its inflation expectations ahead of the year would rise by nearly 5%.
The National Federation of Independent Business Research has proven similar darkness among small business owners earlier this month.
Inflation, measured by the Labor Bureau's Consumer Price Index, is up 2.8% per year, while the Commerce Department's Personal Consumption Expense Price Index is 2.5%.
In their economic model, Fed economists are working to separate inflation that is expected to come from Trump's tariff policies from price pressures occurring elsewhere in the economy. Powell said Wednesday that the labor market is not currently a source of inflation.
“It would be very difficult to accurately assess the amount of inflation from tariffs and other things [sources]Powell said. “Common inflation has increased significantly in the first few months of the year, and trying to turn it back to actual tariff increases is very, very challenging.”
Powell also said that the federal government-wide layoffs — another major initiative by the Trump administration — have not had a major impact on the national economy.
“The layoffs that are happening here certainly make sense to those involved and may make sense to certain neighbours, regions, and regions, but they are not yet important at the national level. But we don't know about them yet.
