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Fed Chair Powell Warns Trump's Tariffs Could Drive Inflation and Slow Growth

Jerome Powell highlights the unprecedented scale of tariffs and signals a pause in rate adjustments as markets react sharply to heightened economic uncertainty.

During a speech at the Chicago Economic Club Federal Reserve chair Jerome Powell said the central bank was focused on ensuring price increases caused by President Donald Trump's tariffs didn't persist.
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Overview

  • Federal Reserve Chair Jerome Powell stated that President Trump's tariffs are significantly larger than anticipated, likely causing higher inflation and slower economic growth.
  • Powell emphasized the potential for a conflict between the Fed's dual mandate of price stability and maximum employment, describing it as a 'challenging scenario.'
  • The Fed will hold off on interest rate changes while assessing the long-term economic effects of the tariffs, prioritizing clarity over immediate action.
  • U.S. financial markets experienced steep declines following Powell's remarks, with the Nasdaq Composite down 3.4% and other major indices seeing significant losses.
  • Powell underscored the uncertainty created by the fluctuating tariff policies, comparing their scale to historic trade disruptions like the Smoot-Hawley Tariff Act of 1930.