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U.S. Faces Growing Stagflation Risks as Tariffs Drive Inflation and Slow Growth

Federal Reserve Chair Powell warns that tariffs are likely to worsen inflation and stagnate economic growth, creating challenges for monetary policy and consumer markets.

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 stated that tariffs are "highly likely" to increase inflation and slow economic growth, raising concerns about stagflation.
  • Economists predict near-zero growth in the coming quarters, with rising unemployment and persistent price increases exacerbating economic pressures.
  • Stagflation presents a policy dilemma for central banks, as raising interest rates to curb inflation could worsen unemployment, while lowering rates may fuel further price increases.
  • Investors are shifting toward defensive assets like gold, which has seen increased demand due to economic uncertainty and stagflation fears.
  • Australia is expected to face low risk of stagflation compared to the U.S., according to economists, despite global trade tensions and tariff impacts.