WASHINGTON: Federal Reserve Chair Jerome Powell has warned that the economic impact of the recently imposed U.S. tariffs is likely to be much larger than previously anticipated, pointing to rising inflation and slowing growth as key concerns.
Speaking at the Society for Advancing Business Editing and Writing (SABEW) annual conference, Powell said, “It is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
This marked a clear shift from Powell’s earlier, more optimistic remarks in March, where he described the inflationary impact of tariffs as likely to be temporary. On Friday, however, he struck a more cautious tone, acknowledging that inflation from tariffs could last longer and hit the economy harder.
Markets responded sharply to Powell’s remarks. By 11 a.m. EDT on Friday, the Dow Jones Industrial Average had dropped more than 1,000 points, following a nearly 1,700-point loss the previous day. The Nasdaq and S&P 500 indexes also fell over 3 percent, in their worst back-to-back declines since 2020.
Amid the turmoil, former President Donald Trump criticized Powell on his social media platform, urging the Fed to immediately cut interest rates. “This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates,” Trump wrote. He accused Powell of delaying rate cuts for political reasons and claimed prices for essentials had already fallen.
In his speech, Powell emphasized the Fed’s responsibility to contain inflation and maintain economic stability. “The central bank must ensure that the inflationary shock from tariffs does not evolve into a deeper economic problem,” he said.
The developments highlight growing friction between the Federal Reserve’s policy decisions and political demands, as economic uncertainty continues to rise.
