Powell warns Trump tariffs, risks are ‘significantly larger than expected’

Federal Reserve Chair Jerome Powell said Friday that the size and potential economic harm of President Trump’s new tariffs were far larger than anticipated, raising new challenges as the bank attempts to end its inflation fight.

In a Friday speech to a business journalism conference, Powell warned that the scope and scale of Trump’s new reciprocal tariffs exceeded expectations and raised the risk of long-term inflation increases.

Powell did not mention by Trump by name and made clear his comments were simply an analysis of the challenges the Fed may face as the bank aims to bring interest rates down, not a criticism of administration policy.

“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected. The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell said.

“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent. Avoiding that outcome would depend on keeping longer-term inflation expectations well anchored, on the size of the effects, and on how long it takes for them to pass through fully to prices.”

Powell’s comments came as stock markets were suffering through another brutal sell-off driven by Trump’s sweeping new tariffs.

The Fed chief and his colleagues had warned for months that large import taxes would make it harder for the bank to bring interest rates down after hiking them to fight inflation.

Powell said Friday that interest rates are currently set at a “slightly restrictive” level, which he said was appropriate with inflation above the Fed’s 2 percent annual target.

Higher-than-expected inflation would likely keep the Fed away from cutting rates, raising the risk of further tensions with Trump.

Trump criticized Powell on Truth Social shortly before the Fed chief was set to deliver his remarks, urging him to cut rates and accusing him of playing politics with the economy.

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image, and quickly,” Trump wrote Friday.

Trump then claimed the prices of several food and energy products had already fallen since he took office, even as inflation as remained close to 3 percent.

“A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” Trump wrote.

Powell said repeatedly on Friday that it wasn’t the role of the Fed to weigh in on politics.

“I make it a practice not to respond to any elected official’s comments. I don’t want to be seen to be doing that,” he said.

Powell also declined to comment on the sweeping cuts the Trump administration is making to numerous federal agencies, including the Internal Revenue Service and the Federal Trade Commission, though he did note ongoing regulatory changes that he described as “significant.”

Trump fired two members of the Federal Trade Commission (FTC) despite federal law banning him from doing so for political or policy reasons. The firing have set up a legal battle over the independence of federal agencies, which could put Powell’s job at risk.

As the head of the board of an independent agency, Powell is only fireable under federal law if he shows neglect of office or serious misconduct. The Fed chair insisted Friday that he will serve out the remainder of his term, which ends next year.

Updated at 12:52 p.m. EDT