'While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that effects could be more persistent,' Jerome Powell says
US Federal Reserve (Fed) Chair Jerome Powell on Friday said that the reciprocal tariffs announced Wednesday were "larger than expected" and they will result in higher inflation and slower growth.
"We have stressed that it will be very difficult to assess the likely economic effects of higher tariffs until there is greater certainty about the details, such as what will be tariffed, at what level and for what duration, and the extent of retaliation from our trading partners," Powell said at a conference in Virginia.
Stating that the size and duration of the effects caused by the tariffs remain uncertain, Powell said that they will likely cause at least a temporary rise in inflation, adding that it is also possible that the effects could be more persistent.
He noted that the higher tariffs will likely raise inflation in the coming quarters and said, "Reflecting this, both survey- and market-based measures of near-term inflation expectations have moved up."
"By most measures, longer-term inflation expectations—those beyond the next few years—remain well anchored and consistent with our 2 percent inflation goal. We remain committed to returning inflation sustainably to our 2 percent objective."
Powell made it clear that the Fed will not make any rushed decisions in monetary policy and said: "It is too soon to say what will be the appropriate path for monetary policy."
"We will continue to carefully monitor the incoming data, the evolving outlook, and the balance of risks. We are well positioned to wait for greater clarity before considering any adjustments to our policy stance," he added.
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