In a speech in Virginia, Federal Reserve Chair Jerome Powell expressed concerns that President Trump’s newly announced tariffs could lead to higher inflation and weaker economic growth. He noted that the scale of the tariffs exceeded expectations, introducing significant uncertainty for businesses and consumers. However, Powell emphasized that the Fed will maintain its current wait-and-see approach on monetary policy until the economic impact becomes clearer.
Powell acknowledged that while the U.S. economy remains strong for now, escalating protectionist measures could eventually dampen growth. He stressed that it’s too early to determine whether the Fed should adjust interest rates but reiterated the central bank’s long-term commitment to stabilizing inflation. His remarks suggest the Fed is closely monitoring trade developments but won’t act preemptively unless data confirms sustained economic damage.
Markets will now watch for signs of tariff-driven price pressures in upcoming inflation reports, which could force the Fed to reconsider its policy stance. Powell’s cautious tone indicates that while no immediate rate cuts are planned, the Fed stands ready to respond if trade disruptions significantly alter the economic outlook.
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