Fed Chair Warns Trump Tariffs Will Increase Prices, Leaves Interest Rates Unchanged

Federal Reserve Chairman Jerome Powell plainly stated that President Donald Trump’s tariffs will result in increased prices in the near future.

Powell on Wednesday spoke at a conference to discuss the country’s economic outlook over the next few years. The chairman also revealed the Federal Reserve decision to leave interest rates unchanged. That decision is sure to draw the ire of the president, who’s insisted for months that the rates be decreased to counter inflation.

While detailing a number of economic indicators, Powell explained the impact that the tariffs will likely have on consumers:

Changes to trade, immigration, fiscal and regulatory policies, continue to evolve; and their effects on the economy remain uncertain. The effects of tariffs will depend, among other things, on their ultimate level. Expectations of that level — and thus, of the related economic effects — reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.

The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It’s 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 into prices, and ultimately on keeping longer term inflation expectations well-anchored.

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