“Jerome Powell Sounds Alarm on Trump’s Tariffs: Are We Facing Long-Term Inflation?” | CNN Business

Federal Reserve Chair Jerome Powell recently expressed concerns about rising inflation due to President Trump’s new tariffs. He noted that these tariffs could lead to higher prices for consumers, which might last longer than expected.

At a recent event near Washington, Powell pointed out that the economic outlook is uncertain. He warned there is a significant risk of both higher unemployment and inflation. He stated, “While tariffs are likely to temporarily raise inflation, their effects might become persistent.”

This situation is significant because the tariffs announced by Trump are the steepest in U.S. history, surpassing those from the 1930 Smoot-Hawley Act. Starting on Saturday, a 10% tariff on all imports will take effect, with even higher tariffs set for April 9.

The response from economists has been worrying. For instance, JPMorgan has recently raised the odds of a global recession to 60% if the tariffs continue. Forecasts predict that prices, especially for cars, will climb this year.

Powell highlighted that these tariffs could push the country toward a “stagflation” scenario — a blend of stagnant growth, high unemployment, and soaring inflation. This was a major issue faced by the economy in the 1970s and presents a challenge for the Fed today.

Kathy Bostjancic, chief economist at Nationwide, commented that the Fed is in a difficult position, with inflation likely to rise while economic growth slows. Despite this, Trump has been vocal, urging the Fed to lower interest rates, suggesting it’s an opportune moment for such a move.

Currently, the Fed is holding interest rates steady as they wait for clearer signs of inflation trends and the impact of Trump’s trade policies. They previously cut rates three times last year in response to slowing inflation but faced challenges in maintaining that trend into the new year.

Recent data indicates that the job market remains strong, reducing the urgency for further rate cuts. However, Powell noted that the tariffs are expected to have extensive effects on the U.S. economy, leading to complex decisions for the Fed if inflation and unemployment rise simultaneously.

Moreover, consumer confidence has dipped sharply, with March seeing the lowest levels since January 2021. The small business sector is also feeling the pinch, with significant uncertainty about the economic forecast.

Fed Vice Chair Philip Jefferson echoed these sentiments, suggesting that persistent uncertainties could hinder economic activity. He remains hopeful that by next year, there will be greater clarity about the effects of the Trump administration’s policies.

Powell concluded that the best course of action for the Fed, amid the current chaos, is to keep interest rates stable for now. The Fed will reconvene for policy discussions on May 6-7, but for now, they will observe how the situation unfolds.

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