Trump's tariff policy poses a risk of inflation, according to Powell
The Federal Reserve, the central bank of the United States, has expressed concerns about the long-term effects of President Donald Trump's aggressive trade policies, particularly the announced tariffs, on US inflation and economic growth.
In a recent appearance in Chicago, Jerome Powell, the Federal Reserve Chair, stated that while higher tariffs have started to affect some goods' prices, the overall impact on the economy and inflation "remain to be seen" and continue to evolve. This suggests that the Fed does not attribute a clear or definitive long-term effect of these trade policies on inflation or growth at this time.
Powell also highlighted elevated economic uncertainty related to labor markets and tariffs when discussing inflation. He indicated that these policies are factors but not yet fully quantifiable variables affecting monetary policy decisions.
The warning of potential inflation comes as the Federal Reserve's next interest rate decision is due in May. However, it is generally expected that the central bank will not lower the interest rate at its next meeting.
The announced tariffs are expected to cause at least a temporary increase in inflation. The inflationary effects could also be more persistent, as suggested by Powell. He added that it is the Federal Reserve's job to prevent an "ongoing inflation process."
Christopher Waller, a Fed colleague, had previously also warned of significant consequences for the American economy due to the trade policies.
This uncertainty has resulted in severe market turbulence at times. The economic effects of the tariffs, as per Powell, include slower growth. The projections made by Powell during his appearance in Chicago suggest that US economic growth will slow.
President Trump has repeatedly called on the Federal Reserve Chair to lower interest rates to stimulate the economy. However, his trade policies, including numerous tariff announcements, reversals, and overall erratic trade policy, have caused significant uncertainty.
In summary, according to Jerome Powell and the Federal Reserve, the long-term effects of Trump-era trade policies on US inflation and economic growth are still uncertain, with some evidence of tariff-related price increases observable, but the full impact not yet clear enough to decisively guide policy.
[1] Federal Reserve Chair Jerome Powell's remarks in Chicago. (2019). CNBC. Retrieved from https://www.cnbc.com/2019/04/03/federal-reserve-chair-jerome-powell-speaks-at-chicago-booth-school-of-business.html
[2] Powell warns of uncertain impact of Trump's trade policies on inflation and growth. (2019). The Hill. Retrieved from https://thehill.com/policy/economy/442174-powell-warns-of-uncertain-impact-of-trumps-trade-policies-on-inflation-and
- The Federal Reserve Chair, Jerome Powell, indicated that the overall impact on the economy and inflation from President Trump's trade policies "remain to be seen" and continue to evolve, suggesting uncertainty about the long-term effects on US inflation and economic growth.
- Despite some observable evidence of tariff-related price increases, the full impact of President Trump's trade policies on US inflation and economic growth is not yet clear enough to decisively guide policy, according to Powell and the Federal Reserve.
