Federal Reserve Chair Jerome Powell has warned that President Trump’s recently announced global tariffs could have “significantly larger than expected” impacts on the U.S. economy, potentially producing higher inflation and slower growth.
That statement represents a change from Powell’s March assessment, when he said tariff effects were likely to be temporary. He now cautions that the new measures could create more substantial and longer-lasting pressures on prices and activity.
Despite these concerns, Powell stressed that the Federal Reserve will remain patient in adjusting interest rates. He said policymakers are “well positioned to wait for greater clarity” before making moves, prioritizing caution so they do not overreact to short‑lived price swings.
Powell highlighted the Fed’s chief priority: preventing temporary increases in prices from becoming a persistent inflation problem that would require tighter policy to correct. He expects policy uncertainty stemming from trade developments to diminish within a year, which should make the true economic effects easier to assess.
Markets reacted negatively to his comments, with stocks falling and bond prices rising as investors reassessed the outlook for growth and inflation. Still, Powell reiterated that, despite current headwinds and recent market volatility—such as the S&P 500’s roughly 11% decline year to date—the U.S. economy “is still in a good place.”