Fed’s Powell says central financial institution might face ‘difficult situation’ resulting from tariffs

‘The Massive Cash Present’ panel discusses Federal Reserve Chairman Jerome Powell’s warning concerning the impression of tariffs on inflation.

Federal Reserve Chairman Jerome Powell stated on Wednesday that the central financial institution might face a “challenging scenario” because it contends with President Donald Trump’s tariffs.

Powell stated the duties on U.S. buying and selling companions imposed by the White Home are “significantly larger than anticipated,” and that they’re “highly likely” to result in a short lived rise in inflation.

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell stated in ready remarks to the Financial Membership of Chicago. “If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.

Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington, D.C.  (Alex Wong/Getty Images / Getty Images)

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The Fed chair also said the central bank would wait for more data on the economy’s direction before changing interest rates, as it aims to reduce inflation to its 2% target.

“In the interim, we’re properly positioned to attend for higher readability earlier than contemplating any changes to our coverage stance,” Powell said. His remarks noted a potentially tough situation developing for the Fed in which inflation is pushed higher by tariffs while growth and potentially employment weaken.

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The outlook has now become extremely uncertain, Powell said, with “elementary modifications” in policy that don’t provide businesses and economists with any clear parallels to study.

In his first public remarks on recent financial volatility, however, Powell said he felt that bond and stock markets were functioning well, with the swings in security values showing investors taking stock of the new landscape.

The main entrance to the Marriner S. Eccles Federal Reserve Board Building, in Washington, D.C. (Photo via Smith Collection/Gado/Getty Images / Getty Images)

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Asked if there is a “Fed put” where the central bank will step in if markets plummet, Powell said “no, with an evidence… Markets are processing what is going on on…markets are combating quite a lot of uncertainty and meaning volatility. However having stated that, markets are functioning… Conditional on being in such a difficult scenario, markets are doing what they’re purported to do. They’re orderly they usually’re functioning nearly as you’ll anticipate them to operate.”

Reuters contributed to this report