Fed Chair Powell Emphasizes Inflation Risks Of Trump Trade War

The Federal Reserve appears to be provoking a new growth of inflation from President Donald Trump’s tariff campaign.

In a speech by the Economic Club in Chicago on Wednesday, Fed Chair Jerome Powell said that Central Bank officials have expected that Trump has done the cost of living import taxes in this month to carry forward the cost of living and is not determined that the price bout turns in a long period of inflation.

Powell said, “Tariffs are greater than the expectation of forecasters, of course, bigger than our expectations, even in our opposite case,” Powell said.

Powell’s comment highlighted the possible response of the fed to the rapidly changing trade war. Powell said that the trade policy could be a shock for both sides of Fed’s “double mandate” to keep inflation under control and is unemployed in investigation. Powell suggested that the fed was not ready to jump to promote financial markets and economy – by cutting interest rates – at least not yet.

Fed is unlikely to cut your impressive interest rate

Powell echoed the recent comments of other Fed officials, saying that tariffs can create a “challenging” scenario by slowing the economy by increasing war prices.

The main tool of the Fed for the management of the economy is increasing or reducing the rate of federal funds, which affects the cost of borrowing on all types of loans. A high fed fund rate means more expensive debt, and a slow economy, reducing inflation pressure. A low Fed Fund rate means easy money and job market.

Fed has kept the rate high in recent years to combat the post -inflation epidemics, and Powell’s comments indicated that Fed would be reluctant to cut rates, even though the financial markets have dived.

Asked if the fed would step up with a cut rate cut. If the market collapsed, Powell said, “No, with an explanation” – -the marches were working in a systematic fashion and guessing the uncertainty around the rapidly changing tariff policies.

Pavel price growth through growth

A tariff, in principle, has an increase in the price of one time, while inflation is, according to the definition, there is a continuous increase in prices.

From that argument, the central bank principle decides that the fed must look at “through” tariff-powered value “and not necessarily increase the interest rates or keep them high in response. However, Powell said that the central bank experience during the epidemic challenged that argument.

For example, he said, disruption of computer chips supply affects car prices, which were a major reason in 2022.

“Our role is to ensure that it is a once increase in prices and not something that turns into an ongoing inflation process,” he said.