Federal Reserve Chair Jerome Powell struck a sobering tone on Friday, warning that President Donald Trump’s newly announced tariffs are “larger than expected” and could carry significant economic fallout, including slower growth and higher inflation. Speaking at a conference in Virginia, Powell acknowledged the uncertainty gripping the economy, noting the Fed now faces the risk of both rising unemployment and elevated inflation—undermining its dual mandate.The Fed Chair made it clear that the central bank is in no rush to respond with sweeping monetary easing, despite mounting pressure. While he refrained from criticising Trump’s policies directly, Powell underscored the growing unpredictability surrounding trade and its impact on inflation expectations. He warned that while tariffs may cause a short-term spike in prices, there's a real risk they could lead to more persistent inflation if left unchecked. “Our obligation is to keep longer-term inflation expectations well anchored,” Powell said, hinting at the fine line the Fed must walk between market support and inflation control. Just weeks ago, the economy seemed to be in a “sweet spot”—now, Powell said, “uncertainty is high,” and the path forward is anything but clear.
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