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Federal Reserve Chair Jerome Powell warned Friday that the sweeping tariffs imposed by President Donald Trump could drive inflation higher, potentially leading to prolonged economic instability, CNN reported. Speaking at an event in Arlington, Virginia, Powell outlined the risks posed by the tariffs, underlining the uncertain economic outlook.
“We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation,” Powell said in prepared remarks, according to CNN. He explained that the tariffs, while likely to result in a temporary spike in inflation, could also lead to more persistent price increases, depending on their long-term impact on the economy. “While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent,” Powell reportedly said.
His comments came just days after the Trump administration unveiled a new set of tariffs, which were described by Fitch Ratings as the “sharpest” in over 200 years. According to the report, the new tariffs are even steeper than those implemented during the Great Depression under the Smoot-Hawley Act of 1930. Starting Saturday, a 10% tariff will be applied to all US imports, with even higher tariffs scheduled to take effect on April 9.
The Federal Reserve Chair suggested that, in light of these developments, the central bank’s best course of action would be to hold interest rates steady for the time being. Powell indicated that the Fed would continue to monitor the situation closely as it weighs its next steps, with the next policy meeting scheduled for May 6- 7.
The Trump administration’s aggressive tariff measures are expected to raise the cost of goods imported into the US, putting upward pressure on prices for consumers and businesses alike.
