Fed Chair Jerome Powell Points to ‘Tariff Inflation’ As Dragging Down the Economy

Jerome Powell, the chair of the Federal Reserve, took questions on Wednesday after announcing that there would be no rate cut for the time being as inflation and tariffs create “uncertainty.”

“Are you still projecting two rate cuts this year if your own projections show inflation higher for longer? Does that mean you see a slowdown in economic growth as a real threat?” Powell was asked during the briefing.

“So I think if you, yeah, I mean, remember we came into this with, at the December meeting, the median was two cuts, the median was. And so you come in and you see, broadly speaking, weaker growth, but higher inflation. And they kind of balance each other out. So you think, and unemployment is really, they’re really only a one-tenth change,” he replied, adding:

So it’s, there’s just not a big change in the forecast, there really isn’t. Modest, you know, meaningfully higher growth and meaningfully higher inflation, which call for different responses, right? So they cancel each other out and people just said, okay, I’m going to stay here. But the second factor is, it’s so highly uncertain.

Later in the briefing, Politico’s Victoria Guida asked specifically about the impact of President Donald Trump’s tariff policy.

“I wanted to ask first of all, if you could clarify, you were talking about how tariffs were a good part of the uptick in the inflation forecast, and I was just wondering what that specifically refers to, is that the tariffs that have already been put in place, is that anticipating some of the tariffs that might be coming on April 2nd?” she asked, adding:

And then also, if you wouldn’t mind talking a little more about the balance sheet decision and what drove that. Did that have anything to do with expectations of how the debt ceiling, raising the debt ceiling might affect the reserve supply?

“Yeah, so, in the SEP, you’ll see that there’s not further progress on core inflation this year. We’re kind of flatlining, going sideways. We don’t ask people to write down how much of this is from tariffs and how much of it is not. But some of it is from tariffs. We know that tariffs are coming in. And we know that they’re probably already, all forecasters have tariff inflation affecting core PCE inflation, core CPI inflation this year, without exception. I’m not aware of an exception, so it’s in there. I can’t tell you how much of that it is,” Powell said as part of a longer answer.

Powell, who was appointed by Trump, told Guida in November that he would not step down if Trump asked him to or tried to fire him.

Watch the full clip above.