 "Fed Chair Powell warns Trump tariffs may fuel inflation, force bank into tough trade-off")
Fed Chair Jerome Powell on Wednesday warned Donald Trump’s tariffs are expected to drive up prices and slow economic growth, potentially forcing the Federal Reserve to choose between curbing inflation and preserving jobs.
“Tariffs are highly likely to generate at least a temporary rise in inflation,” AFP quoted Powell as telling the Economic Club of Chicago, warning that the 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,” he added, echoing similar remarks earlier this month.
Unlike many central banks, the US Federal Reserve operates under a dual mandate from Congress: to maintain stable prices and achieve maximum sustainable employment.
It manages these goals by adjusting interest rates to either stimulate or cool down economic demand.
Powell noted that while inflation and employment are currently in balance, future conditions could force policymakers into the difficult position of choosing between the two.
US markets fell following Powell’s remarks, with the tech-rich Nasdaq Composite down 3.4 percent at around 12:50 pm local time in Chicago (1750 GMT).
President Trump’s stop-start tariff policy has unnerved investors and trading partners unsure about the long-term policy, and what it might mean for international trade.
Most economists have warned that tariffs will push up prices - at least temporarily - while acting as a drag on growth.
The Trump administration has insisted that the levies are just one part of an overall economic platform including tax cuts and deregulation designed to stimulate supply, boost growth, temper inflation, and return manufacturing jobs to the United States.
Impact Shorts
More ShortsPowell said tariffs would be “likely to move us away from our goals,” referring to the Fed’s dual mandate.
With inputs from agencies
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