Federal Reserve Chair Jerome Powell recently addressed the economic implications of President Trump’s tariffs during a speech at the Economic Club of Chicago. Powell noted that the magnitude of tariff increases has been larger than anticipated, likely leading to higher inflation and slower economic growth. Survey and market-based measures indicate significant shifts in near-term inflation expectations, attributed to tariffs. Longer-term inflation expectations remain stable, but the Fed may face challenges balancing its dual mandate of maximum employment and price stability. Powell warned that tariffs could create a scenario where interest rate adjustments conflict with economic goals, risking stagflation. The Fed is likely to maintain a wait-and-see approach, contrary to Trump’s calls for rate cuts. Market reactions to Powell’s remarks were negative, with indices declining. Uncertainty persists as trade negotiations, particularly with China, remain unresolved.
— new from The Motley Fool
