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Jerome Powell Appears to Be Critical of Tariffs in Press Conference
Federal Reserve Chairman Jerome Powell defended the central bank’s decision to keep interest rates unchanged, despite growing calls to lower them. Powell also appeared critical of the administration’s planned tariffs, cautioning that such trade measures could negatively impact the broader economy by increasing inflation and disrupting growth
Following the FOMC announcement today, Chairman of the Federal Reserve Jerome Powell addressed reporters to justify the Fed’s decision not to adjust interest rates. Additionally, the Chairman appeared to criticize the White House’s decision to implement large tariffs, warning of the potential effects such measures could have on inflation and the broader economy.In his opening statement,
Chairman Jerome Powell stated:
“My colleagues and I remain focused on our dual mandate of maximum employment and a strong economy for the benefit of the American people, despite heightened uncertainty. The economy remains in a solid position. The unemployment rate remains low and is at or near maximum employment. Inflation has come down a great deal but remains somewhat above our 2 percent longer-run objective.
In support of our goals, today the FOMC decided to leave the federal funds rate unchanged. The risks of higher unemployment and higher inflation appear to have risen, and we believe that our current position gives us the best chance to respond in a timely way to further economic developments.”
Following reports that GDP grew 2.5% last year, it has now been reported that GDP growth declined this quarter. This reflects companies’ reaction to rising imports ahead of the likely implementation of future tariffs. This unusual swing has complicated GDP measurement for the last quarter.
Consumer spending has continued to grow at similar rates to last year. However, recent surveys show a sharp decline in consumer sentiment and overall economic outlook, largely reflecting concerns over current trade policies. It remains to be seen how this will affect future spending.
The Chairman also emphasized that the labor market remains strong and that the United States is close to maximum employment. He noted that the labor market is not currently a significant contributor to inflation.
On the subject of tariffs, Powell said
“The tariff announcements so far have been larger than anticipated. While these policies are still evolving, the effects of these tariffs on the economy remain highly uncertain. As economic conditions change, we will continue to determine the appropriate stance of monetary policy based on incoming data and the evolving balance of risks.
If the announced tariffs are sustained, they will likely contribute to a rise in inflation and harm economic growth, potentially leading to increased unemployment. The effects on inflation could be short-lived, reflecting a one-time shift in price levels. However, these effects could be more long-lasting depending on the size of the tariffs and how long they take to fully pass through the economy.
Our goal is to prevent a one-time price increase from becoming a lasting mark on the inflation level.”
Jerome Powell also noted that "the possibility of price instability caused by tariffs prevents the Fed from maintaining the ideal economic conditions that benefit all Americans. He warned that the Fed may find itself in a scenario where its dual mandate goals—maximum employment and price stability—are in tension. If that occurs, the central bank would need to consider how far the economy is from each goal and anticipate the timelines over which those respective gaps must close. For the time being,”
Powell concluded, “we are well positioned to wait for further clarity before adjusting our policy stance.”
While the overall tone of the Federal Reserve press conference reflected the cautious and data-driven stance of both the Fed and the Federal Open Market Committee (FOMC), Chairman Jerome Powell stood out for his pointed remarks on the potential economic consequences of recently announced tariffs. Powell expressed concern over how such trade policies could disrupt consumer sentiment and spending, which have been key drivers of the post-pandemic recovery. He emphasized that consumer confidence remains fragile and warned that aggressive tariff policies could erode that confidence, potentially leading to decreased household spending and slower economic growth.
Powell also highlighted the inflationary risks posed by sustained tariffs, explaining that they could lead to long-term price increases. These concerns are particularly pressing given that the Federal Reserve has spent the past five years attempting to bring inflation back under control and closer to its 2% target. Sustained upward pressure on prices due to tariffs could undermine those efforts and force the Fed to maintain elevated interest rates longer than originally anticipated.
In the wake of President Trump’s “Liberation Day” announcement, which introduced a broad set of tariffs on imported goods, several major corporations—especially in the automotive and tech industries—have voiced concerns. These companies rely heavily on global supply chains, and executives warn that the increased costs of production will inevitably be passed on to consumers. This scenario could not only dampen consumer demand but also deepen inflationary pressures, putting further strain on the broader economy and complicating the Fed’s policy decisions.
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