The Federal Reserve decided to maintain interest rates unchanged, with projections pointing toward potential decreases in 2025. Nonetheless, Jerome Powell, the Chair of the Federal Reserve, urged caution against relying too heavily on this forecast.
During a press conference following the central bank’s two-day meeting, Powell warned of impending inflation pressures, partly due to the impending import tariffs proposed by the Trump administration.
Powell emphasized that the predicted path for interest rates lacks strong conviction and is subject to change based on economic data. He noted that recent economic challenges, including subdued growth, increasing unemployment, and rising prices, had prompted policymakers to temper their expectations for rate reductions.
Absent these tariffs, the current environment of low inflation might have warranted rate cuts, according to Powell. However, upcoming tariffs are anticipated to drive a considerable increase in inflation, impacting various stakeholders in the supply chain—from manufacturers to retailers.
The Fed’s chairman stated that his coworkers forecast significant inflation growth in the months ahead due to tariffs. He elaborated that the financial burden of these tariffs would eventually be felt by consumers since each party involved will strive to avoid shouldering the cost. Ultimately, he stressed that these tariffs would translate to higher costs for consumers.
Powell concluded by advising patience, suggesting that the Fed’s decisions will be more informed if they delay and observe how the tariffs impact inflation. This wait-and-see approach would allow for a clearer understanding of how new import taxes will affect the broader economy.
