Fed Chair Jerome Powell says Trump tariffs are ‘likely to raise inflation’—and the economic hit will be ‘significantly larger’ than expected

Fed Chair Jerome Powell warned on Friday that President Donald Trump’s sweeping tariffs would likely push inflation higher, dampening investors’ hopes that the central bank would cut interest rates later this year. 

“Higher tariffs will be working their way through our economy and are likely to raise inflation in coming quarters,” Powell said, speaking in Arlington, Va., at a business journalism conference. “While uncertainty remains elevated, it is now becoming clear that tariff increases will be significantly larger than expected, and the same is likely to be true of economic effects, which will include higher inflation and slower growth."

Powell’s statements indicate the Fed won’t make interest rate moves for the time being, dashing the hopes of investors and President Trump, who has been loudly calling for rate cuts. The Fed’s effective rate is currently about 4.3%, where it has stayed since December. 

“It feels like we don’t need to be in a hurry. It feels like we have time,” Powell said, emphasizing the Fed’s wait-and-see approach. “Inflation is going to be moving up, and growth is going to be slowing, but to me it’s not clear at this time what the appropriate path for monetary policy is going to be. We’re going to need to wait and see how this plays out before we make those adjustments.” 

Powell did describe the current economy as strong, citing the latest jobs report released on Friday, which showed unemployment remaining steady at 4.2% and a surprisingly high number of jobs created in March—nearly 230,000. But he acknowledged that data was collected before several recent events that could have major economic repercussions, like Trump’s “Liberation Day” tariffs announcement. 

Since the Wednesday announcement, economists have downgraded their outlooks for the U.S. economy citing the likely price increases that tariffs would generate. JPMorgan now predicts a 60% chance the U.S. will sink into recession this year, and called the impact of the proposed tariffs “the largest U.S. tax hike since 1968.”

Throughout his speech, Powell took great pains to emphasize that the Fed was independent of politics, and focused squarely on its dual mandate, of “maximum employment and price stability.”

“We're driven by analysis and careful thought, and discussion, and debate and the merits of things,” he said. “We try to stay as far as we can from the political process,” 

The same cannot be said of President Trump, who earlier on Friday addressed Powell specifically in a post demanding that he lower interest rates.  

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut interest Rates. He is always ‘late,’ but now he could change his image, and quickly,” Trump wrote. “Energy prices are down, Interest rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months - A BIG WIN  for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

This story was originally featured on Fortune.com