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Federal Reserve Chair Jerome Powell warned on Wednesday that President Donald Trump’s tariff regime could lead to increased inflation and unemployment, as well as a slowdown in the U.S. economy as a whole.
“If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” Powell said during a press conference Wednesday. “The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent.
“Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully,” he added.
Powell spoke to reporters after announcing that the Federal Reserve will not be changing its key interest rates in response to Trump’s tariff policies and global trade dispute. “In support of its goals, the committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent,” the Fed wrote in its Open Market Committee statement.
Powell added while speaking to the press that “what looks likely, given the scope and scale of the tariffs, is that we will see, certainly the risks to higher inflation and unemployment have increased,” Powell said. “And if that’s what we do see and if the tariffs are ultimately put in place at those levels, which we don’t know, then we won’t see further progress toward our goals.”
Shortly before the announcement, Trump told reporters that he would not be dropping the 145-percent tariff rate he implemented against China in order to convince them to come to the table and negotiate a trade deal.“No,” the president told reporters when asked if he would considering relieving some of the tariff in order to jumpstart discussions.
Trump has made clear that he would like the Federal Reserve to significantly lower interest rates as a way to increase investor interest in the United States, but the independent Fed had so far refused to bend to the president’s demands, despite Trump’s threats to forcibly remove Powell. Last month, Trump attacked Powell on Truth Social, calling him “TOO LATE AND WRONG.”
“Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!” Trump added.
In April, Trump shared a video on social media which claimed that he was implementing broad tariffs as a ploy to purposefully crash the stock market in order to put pressure on the Fed.“Trump is crashing the stock market by 20 percent this month, but he’s doing it on purpose,” the video claimed, adding that the fallout of the tariffs would force “the Fed to slash interest rates in May, and those lower rates give the Fed the ability to refinance trillions of debt very inexpensively. It also weakens the dollar and drops mortgage rates.”
“Now it’s a wild chess move, but it’s working,” the video added.
Well, it’s May, and the Fed did not slash interest rates in accordance with Trump’s supposed 5-D chess move. The economy is the weakest it’s been in years, and practically every reputable financial institution is warning that hard times are coming if the president doesn’t pump the brakes.
