Fed Chief warns of bigger-than-expected tariff effects

April 05, 2025 (MLN): Federal Reserve Chair Jerome Powell warned that the economic impact of newly imposed tariffs is likely to be significantly larger than initially expected, raising concerns about heightened inflation and slower growth.

His comments come amid escalating pressure from former President Donald Trump, who called on the Fed to cut interest rates as markets reeled from the tariff fallout.

“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected,” Powell said in prepared remarks at the Society for Advancing Business Editing and Writing annual conference.

“The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”

Powell’s tone marked a shift from his more optimistic stance in a March 19 press conference, where he suggested the inflationary impact of tariffs would be transitory. On Friday, he struck a more cautious note, as Bloomberg reported.

“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,” he said.

Shortly after Powell’s speech, the Dow Jones Industrial Average was down more than 1,000 points by 11 a.m. EDT Friday, after losing nearly 1,700 points the previous day.

The Nasdaq composite and S&P 500 index also fell more than 3 percent Friday morning, following their worst single-day losses since 2020.

Amid the market turmoil, Trump took to his Truth Social platform to slam Powell and urge an immediate rate cut.

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates."

He is always ‘late,’ but he could now change his image, and quickly,” Trump wrote.

He accused the Fed chief of refusing to cut rates for political reasons and claimed that prices of food and energy products had fallen since he took office, despite inflation remaining close to 3 percent.

“A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” Trump wrote.

Powell, however, emphasized in his speech that the central bank must ensure that the inflationary shock from tariffs does not evolve into a deeper economic problem.

“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,” he reiterated.

The remarks highlighted the growing tension between economic policy and political pressure, as the Fed weighs its next steps amid an increasingly volatile economic environment.

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