Jerome Powell says Trump tariffs even larger than Fed's upside estimates, can wait on any interest rate moves

The tariffs rolled out by President Donald Trump were larger than even the highest estimates prepared by the Federal Reserve ahead of time, Fed Chair Jerome Powell said on Wednesday.

"The tariffs are larger than forecasters had expected, certainly larger than we expected, even in our upside case," Powell said in response to a question at an event at the Economic Club of Chicago.

Powell further said that trade policies pursued by the Trump administration will create challenges for the central bank to meet its job and inflation mandates this year.

The new trade policies represent significant change, Powell said in an appearance in Chicago.

“The effects of that are likely to move us away from our goals, so unemployment is likely to go up as the economy slows in all likelihood, and inflation is likely to go up as tariffs find their way” into the economy, Powell said. He added this will likely play out over the course of the year.

Powell says Fed to stay on hold until clarity on tariff impact

U.S. economic growth appears to be slowing, with consumer spending growing modestly, a rush of imports to avoid tariffs likely to weigh on estimates of gross domestic product, and sentiment souring, he said.

For now, Powell said in remarks prepared for delivery at the Economic Club of Chicago, the Fed could keep its benchmark interest rate steady “to wait for greater clarity before considering any adjustments to our policy stance.”

Repeating comments made earlier this month, the Fed chief noted that the impact of those and other policy changes “are still evolving,” but likely to be “larger than anticipated.”

“He is basically saying hey, look, you know, tariffs could pose a challenge between controlling inflation and boosting growth.”

“It looks like first quarter growth is slowing down, consumer spending is moderating.”

“Powell’s saying what the market has been fearing all along. And it’s coming from the Fed chief, confirming all these things.” "Gold is sky-rocketing. The S&P is dropping, the Dow and the Nasdaq are at the lows of the day.”

“Powell's comments are just confirming what the market has been fearing all along.” ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, FAIRFIELD, CONNECTICUT

"The Fed is waiting to see where things go before they make any type of movement on rates, to see if inflation is going to be temporary or if it's going to be a one-time thing, to see how long these tariffs last and whether or not there's any kind of change to it."

"They, like everybody else in the market, are probably just as perplexed by the tariffs, the implementation of tariffs and the pullback and the pauses. And that's why they're having to wait this out, because if they move prematurely, they're afraid that they're going to add to the inflationary pressures."