Federal Reserve Chairman Powell: Tariffs may raise inflation and suppress economic growth, will not adjust interest rate policy hastily.

Federal Reserve Chairman Powell said on Friday that President Trump's tariff policy may push up inflation and suppress economic growth. The Fed will not adjust its interest rate policy without a clear understanding of the ultimate impact of tariffs. Powell made the remarks at a business journalists' conference in Arlington, Virginia, saying that the Fed currently faces a "highly uncertain outlook" due to the new round of tariff policies announced by the Trump administration on Wednesday. While he believes the U.S. economy is still strong, he emphasized the potential threats posed by tariffs and said the Fed will focus on inflation risks. "Our responsibility is to ensure that long-term inflation expectations remain stable and to avoid a one-time price increase evolving into a persistent inflation problem," Powell said in his prepared remarks. "We can completely wait for clearer economic signals before considering adjusting our policy stance. It is still too early to judge the future path of monetary policy." Trump urges Fed to cut rates, causing turmoil in markets Just before Powell spoke, Trump urged the Fed to "stop political manipulation" and called for rate cuts due to low current inflation levels. This week, Trump announced a 10% comprehensive tariff on imported goods, and imposed higher retaliatory tariffs on some major trading partners. This decision sparked a massive sell-off in the Wall Street stock market, leading to a sharp deterioration in market sentiment. Powell noted that the scale of the newly announced tariffs "far exceeds market expectations." "Similarly, the impact of these tariffs on the economy may be greater than expected, including pushing up inflation and slowing economic growth," Powell said. "But the specific magnitude and duration of these impacts are still uncertain." Fed focuses on inflation, may not adjust policy in the short term Although Powell did not explicitly state the Fed's next steps in his speech, the market generally expects the Fed to begin implementing a series of aggressive rate cuts starting in June. According to CME Group data, investors believe the Fed may cut rates by at least one percentage point by the end of the year. However, the Fed's core mandate is to maintain stable inflation and achieve full employment. Powell emphasized the importance of containing inflation expectations, but Trump's tariff policy may exacerbate price pressures, and several trading partners have already announced countermeasures, further increasing market uncertainty. In general, the Fed believes that the impact of tariffs on inflation is temporary, rather than a major driver of long-term inflation. However, given the broad scope of the tariffs implemented by the Trump administration, this view may need to be adjusted. "While tariffs are likely to lead to a temporary increase in inflation, the duration of their impact may be longer," Powell said. "Avoiding this situation requires ensuring that long-term inflation expectations remain stable, while also monitoring the specific effects of tariffs on prices and their transmission channels." Data shows that the core inflation rate in the U.S. reached 2.8% in February, although it has fallen slightly, it is still above the Fed's long-term target of 2%. Despite concerns about the impact of tariff policies, Powell still said that the U.S. economy is "still in good condition" and the labor market remains solid. However, he also mentioned that recent consumer surveys show an increase in concerns about inflation and a decrease in expectations for future economic growth. Powell emphasized that current long-term inflation expectations are still in line with the Fed's target, and the Fed will continue to closely monitor market dynamics and make policy adjustment decisions after obtaining clearer economic signals.