WASHINGTON (Reuters) -President Donald Trump's new tariffs are "larger than expected" and the economic fallout including higher inflation and slower growth likely will be as well, Federal Reserve Chair Jerome Powell said on Friday in remarks that pointed to the potentially difficult set of decisions ahead for the central bank.

"We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation," undermining both of the Fed's mandates of 2% inflation and maximum employment, Powell said in prepared remarks for a business journalists' conference in Arlington, Virginia.

Powell spoke as global markets continued a swoon that has wiped some 10% off major U.S. stock indexes since Trump announced a raft of new tariffs on Wednesday. Powell did not address the selloff directly, but acknowledged that the same uncertainty engulfing investors and company executives was facing the Fed. Stocks added to the days losses after Powell's remarks were published.

The Fed, he said, has time to wait for more data to decide how monetary policy should respond, but the central banks' focus will be on ensuring that inflation expectations remain anchored, particularly if Trump's import taxes touch off a more persistent jump in price pressures.

"While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent," Powell said.

"Avoiding that outcome would depend on keeping longer-term inflation expectations well anchored, on the size of the effects, and on how long it takes for them to pass through fully to prices. Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem," he said.

Powell said it was not the Fed's role to comment on the Trump administration's policies but rather to react to how they might affect an economy that he and his colleagues regarded just a few weeks ago as being in a "sweet spot" of falling inflation and low unemployment.

But his comments highlighted the tension the Fed is seeing emerge between "hard data" that remains solid - the economy added 228,000 jobs in March with a 4.2% unemployment rate - and "soft data" like surveys and interviews with business contacts that point to a coming slowdown.

"We are closely watching this tension between the hard and soft data. As the new policies and their likely economic effects become clearer, we will have a better sense of their implications for the economy and for monetary policy," Powell said.

"While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected," he said. "The same is likely to be true of the economic effects, which will include higher inflation and slower growth."

"We are well positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy."

The confounding set of risks, with prices rising even as the economy weakens, has become increasingly central to recent Fed commentary as the scope of Trump's tariff plans become clear and other countries respond.

China has now announced retaliatory tariffs of 34% on all U.S. goods, restrictions on the export of minerals critical to the tech industry, and other measures including limits on imports of U.S.-raised chickens - a nod to Trump's support in rural, agricultural parts of the country.

Global equity markets continued to drop. Administration officials have so far downplayed the decline in equity markets, the worst since the onset of the COVID-19 pandemic, as necessary for U.S. economic gains at some point in the future.

Retaliation by other countries, in this case one of the U.S.'s largest trading partners and the wellspring of many trade grievances among U.S. politicians of both political parties, is one of the channels Fed officials have said could cause Trump's import taxes to lead to more persistent inflation.

While short of classic "stagflation," Fed Governor Adriana Kugler this week said "we're already seeing some upside risks to inflation and some real increases in inflation...We may be seeing down the road a little bit of a slowdown as well," in the economy overall.

Fed Vice Chair Philip Jefferson noted on Thursday that the "substantial amount of uncertainty around trade" could hit household and business spending, while Fed Governor Lisa Cook said that inflation expectations had ticked up "even before yesterday's larger-than-expected announcements on trade policy."

PUSH AND PULL

The push and pull expected between slower growth and rising prices could well keep the Fed on hold until it is clear which trend takes hold more forcefully.

Investors in contracts tied to the central bank's policy rate appear to be expecting the risks to slower growth will dominate.

Markets now expect four quarter-percentage-point rate cuts from the Fed this year versus three before Trump's announcement of tariffs that could tax imports an average of as much as 27% by some estimates, versus about 2.5% at the end of the Biden administration.

(Reporting by Howard Schneider; Editing by Andrea Ricci and Paul Simao)