WASHINGTON: US tariffs will likely cause inflation to rise and growth to slow, Federal Reserve Chair Jerome Powell said Friday (Apr 4), also warning of an “elevated” risk of higher unemployment.
President Donald Trump’s dramatic trade measures announced earlier this week have tightened scrutiny of 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,” 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.
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 per cent.
Other top trading partners will also see higher rates, with the European Union now facing a 20 per cent tariff from Apr 9, and India looking at a 26 per cent levy.
The Trump administration has also targeted specific sectors of the economy, recently slapping a 25 per cent tariff on automobiles not made in the United States.
