Powell Warns of Higher Prices, Weaker Growth After Tariff Plan
Fed chief says tariff hikes—and the likely effects on prices and growth—are ‘significantly larger than expected’
By Nick Timiraos, The Wall Street Journal, Updated April 4, 2025
Federal Reserve Chair Jerome Powell said the U.S. economy was likely to face a period of higher prices and weaker growth than seemed possible a few weeks ago because of larger-than-anticipated tariff hikes announced by President Trump.
His remarks carried an undercurrent of caution about how the central bank would be able to address any fallout because the central bank will want to ensure one-time price increases don’t lead to persistently higher inflation.
In remarks prepared for delivery Friday, Powell indicated the central bank was still comfortable with its wait-and-see stance and that it was focused above all on ensuring the public expected price growth to slow down after any increases to tariffs…
By focusing on inflation in his remarks, Powell underscored how officials believe they have less ability to pre-empt economic weakness caused by the tariffs. That means their attention could turn to how to cushion the blow from any increase in unemployment and slowdown in spending only after it occurs. In other words, the Fed would be responsive to any weakness but less able to pre-empt such weakness… [end quote]
This is a clear warning to the markets: Don’t front-run the Fed the way you did several times before. It won’t end well because the Fed will stick to its guns. The Fed’s job is to prevent inflation expectations from becoming entrenched. They will not cut the fed funds rate to try to stimulate a slowing economy.
Markets can crash overnight but economies take longer to respond. This will be a slow process.
Wendy