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Fed Warns of Stagflation Risks as Tariffs Strain U.S. Economy

Jerome Powell highlights the challenge of combating inflation and stagnation, with near-zero growth forecasts and rising gold investments reflecting growing economic uncertainty.

U.S. Federal Reserve Chair Jerome Powell speaks at a press conference, following a two-day meeting of the Federal Open Market Committee on interest rate policy, in Washington, D.C., U.S., March 19, 2025. REUTERS/Nathan Howard/File Photo
The prospect of stagflation — high inflation and slow growth — will likely hinder home sales and drive prices up, housing experts say. (File photo: Dean Musgrove, Los Angeles Daily News/SCNG)
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Overview

  • Federal Reserve Chair Jerome Powell has publicly flagged stagflation as a significant risk for the U.S. economy, citing persistent inflation and slowing growth.
  • Tariffs from President Trump's trade policies are raising import prices, dampening consumer confidence, and exacerbating inflationary pressures.
  • Economists Lindsey Piegza and Adam Posen warn that near-zero growth and supply shocks from reduced trade with China could prolong stagflation risks.
  • The Federal Reserve faces policy challenges, as traditional tools to combat inflation or boost growth risk worsening either unemployment or inflation.
  • Investors are increasingly turning to gold as a defensive asset, reflecting heightened concerns over the potential for prolonged stagflation.