US tariffs will likely cause inflation to rise and growth to slow, Federal Reserve Chair Jerome Powell said Friday, also warning of an "elevated" risk of higher unemployment.
President Donald Trump's dramatic trade measures announced earlier this week have tightened scrutiny of Jerome Powell and how the Fed will react to free-falling financial markets and concerns that a prolonged trade war would ramp up consumer prices and joblessness rates.
"It is now becoming clear that the tariff increases will be significantly larger than expected," Jerome Powell told an event in Virginia.
"The same is likely to be true of the economic effects, which will include higher inflation and slower growth," he said, adding that it was "too soon" to consider changes to US monetary policy.
Jerome Powell spoke just minutes after Trump posted on social media, urging him to cut interest rates immediately and accusing him of playing politics in his role running the independent US central bank.
The larger-than-expected tariffs unveiled on Wednesday stack on top of earlier country-specific levies, meaning that China, for example, will now face a new levy totaling 54 percent.
Other top trading partners will also see higher rates, with the European Union now facing a 20 percent tariff from April 9, and India looking at a 26 percent levy.
The Trump administration has also targeted specific sectors of the economy, recently slapping a 25 percent tariff on automobiles not made in the United States.
Powell said Friday that he expected the current uncertainty to decline in the coming months.
"Fast-forward a year from now, the uncertainty should be much lower," he noted. "The actual effects of the policies should then be pretty manifest and clear."
Wall Street financial markets extended their earlier declines on Powell's remarks. At around 1:00 pm local time (1700 GMT), the broad-based S&P 500 index was down around 4.6 percent.
No rush to cut
Powell's comments suggest the Fed is in no rush to cut its benchmark lending rate from its current elevated level of between 4.25 and 4.50 percent as it continues its struggle to bring inflation down to its long-term two percent target.
In recent months, the Fed's progress in bringing inflation down to target has stalled, while growth has remained solid and the unemployment rate has hugged close to historic lows.
Trump's return to office has complicated the Fed's path to two percent, with tariffs likely to hit both sides of the bank's dual mandate, forcing them to choose between tackling inflation and keeping unemployment in check.
Last month, the Fed voted to extend its pause in rate cuts, and signaled it wanted to see how the new administration's policies would feed through to the economy before taking any action.
Financial markets see a roughly two-thirds chance that policymakers will vote to keep rates unchanged again at the next Fed interest rate meeting in May, according to data from CME Group.
'STOP PLAYING POLITICS'
Ahead of Powell's speech on Friday, Trump took to his Truth Social platform to insist that his tariff policy would not change despite the market reaction, and then called on Powell to act.
"This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates," he wrote. "He is always 'late,' but he could now change his image, and quickly."
"CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!" added Trump, who first nominated Powell to run the Fed, before turning against him during his first term.
Speaking Friday, Powell insisted he had no plans to step down as Fed chair before his term ends next year.
"I fully intend to serve all of my term," he said during the Virginia event.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
