Fed Chair Powell Says Tariffs Likely to Have Larger Effect on Economy Than Expected

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Fed Chair Powell Says Tariffs Likely to Have Larger Effect on Economy Than Expected

, MT Newswires - 11:48 AM ET 4/4/2025 US Economy

11:48 AM EDT, 04/04/2025 (MT Newswires) -- Federal Reserve Chair Jerome Powell said Friday that the effects of the Trump Administration's tariffs plans are likely to be larger than expected, while significant uncertainty remains.

Powell was speaking at the Society for Advancing Business Editing and Writing Annual Conference.

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

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

It is important to keep longer-term inflation expectations well anchored, Powell said, but the path of monetary policy is uncertain. What is clear, he added, is that the Fed needs to assure that one-time inflation gains do not become an ongoing problem.

"We will continue to carefully monitor the incoming data, the evolving outlook, and the balance of risks," Powell said. "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."

Powell acknowledged that there are risks to both sides of the Fed's dual mandate, with the possibility of higher inflation and higher unemployment, but said during the question-and-answer session that uncertainty should be lower a year from now.

"Our monetary policy stance is well positioned to deal with the risks and uncertainties we face as we gain a better understanding of the policy changes and their likely effects on the economy," Powell said. "It is not our role to comment on those policies. Rather, we make an assessment of their likely effects, observe the behavior of the economy, and set monetary policy in a way that best achieves our dual-mandate goals."

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