Federal Reserve Chair Jerome Powell warned of a potential rise in inflation following President Donald Trump’s tariffs and declining consumer sentiment.
“The administration is, as I mentioned in my remarks, implementing significant policy changes, and particularly trade now is the focus, and the effects of that are likely to move us away from our goals,” Powell said in his first remarks since Trump paused most of the steep tariffs.
Speaking at the Economic Club of Chicago on Wednesday, Powell said the economy was still in a “solid position,” but unemployment and inflation were “likely to go up as tariffs find their way and some part of those tariffs come to be paid by the public.”
Powell has faced pressure from Trump to cut interest rates, including in a Truth Social post in early April where he wrote “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” Trump also said in late March that he’d “like to see the Fed lower interest rates.”
But minutes after Trump’s April 4th Truth Social request, Powell said the Fed was “well positioned to wait for greater clarity before considering any adjustments to our policy stance.” He repeated a near identical line in his remarks Wednesday.
The Fed has resisted the White House more broadly. After instability in the Treasury bond market following Trump’s “Liberation Day” tariff announcement, Semafor reported that the central bank “isn’t accelerating regulatory changes that would encourage banks to load up on government debt.”
And Trump’s back-and-forth on tariffs, which included various pauses for Canada and Mexico for weeks before “Liberation Day” and a 90-day pause in broader steep tariffs for most countries soon after the White House insisted there would be no pause, has made for a fluctuating stock market.
But asked if the Fed would step in if the stock market plummets, Powell said “no.”
“Markets are processing what’s going on. And it’s really the policies, particularly the trade policy,” he said. “Being in such a challenging situation, markets are doing what they’re supposed to do. They’re orderly, and they’re functioning just about as you would expect them to function.”
In April, Powell said at a conference in Virginia that “tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”
Weeks later, his opinion appears similar.
“The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell said. “Tariffs are highly likely to generate at least a temporary rise in inflation. Inflationary effects could also be more persistent, avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and ultimately, on keeping longer term inflation expectations well anchored.”
Powell said data shows consumers might be feeling the same way, pointing to surveys of households and businesses that “report a sharp decline in sentiment and elevated uncertainty about the outlook, largely reflecting trade policy concerns.”
But he did have optimistic points, like that “the labor market is in a really good place.”
“Despite heightened uncertainty and downside risks, the U.S. economy is still in a solid position,” Powell said.
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Nuha Dolby is a NOTUS reporter and an Allbritton Journalism Institute fellow.