Powell: Trump tariffs will 'delay' progress against inflation
Federal Reserve Chair Jerome Powell warned Wednesday that President Trump's new tariffs will likely make it harder for the central bank to bring prices down.
While Powell did not mention the president by name, he told reporters Wednesday that the Fed is bracing for import taxes to impede its fight against inflation.
“I do think with the arrival of the tariff inflation, further progress may be delayed,” Powell said.
He pointed out that a new Fed economic forecast released Wednesday “doesn't really show further downward progress on inflation this year, and that's really due to the tariffs coming in.”
Powell's comments came after the Federal Open Market Committee (FOMC), the Fed panel responsible for setting interest rates, declined to bring down borrowing costs after a two-day meeting in Washington, D.C.
The Fed was widely expected to keep rates steady despite mounting concerns about the state of the economy and the impact of Trump's trade agenda.
Powell described economic uncertainty as “unusually elevated," which poses a challenge to the Fed as it attempts to get ahead of potential price increases.
The New York Fed’s survey of consumer expectations recently showed increasing pessimism about households’ financial prospects. The University of Michigan’s benchmark survey of consumer expectations fell off a cliff in February and showed year-ahead inflation expectations increasing to nearly 5 percent in March.
The National Federation of Independent Business survey evinced a similar gloom among small business owners earlier this month.
Inflation as measured by the Labor Department’s consumer price index is at a 2.8 percent annual increase, while the Commerce Department’s personal consumption expenditures price index is at 2.5 percent.
In their economic models, Fed economists are working to separate out the inflation that’s expected to come from Trump’s tariff policies from the price pressures that are originating elsewhere in the economy. Powell said Wednesday that the labor market is not currently a source of inflation.
“It is going to be very difficult to have a precise assessment of how much of inflation is coming from tariffs and from other [sources],” Powell said. “Goods inflation moved up significantly in the first few months of the year, and trying to track that back to actual tariff increases … is very, very challenging.”
Powell also said that layoffs across the federal government — another major initiative by the Trump administration — are not having a significant effect on the national economy.
“The layoffs that are happening here are certainly meaningful to the people involved and may be meaningful to a particular neighborhood or region or area, but at the national level are not significant yet. But we don’t know. We don’t know yet how far that will go,” Powell said.
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