Breaking: Fed Chairman Powell says Trump tariffs risk higher inflation, slower growth
Federal Reserve (Fed) Chairman Jerome Powell said on Friday that United States (US) President Donald Trump's tariffs are bigger than expected, and they risk higher inflation and slower growth while delivering his prepared speech at the annual conference for the Society for Advancing Business Editing and Writing.
Key takeaways from Powell's speech
"Too soon to say what will be the appropriate path for monetary policy."
"Fed well-positioned to wait for greater clarity before considering policy adjustments."
"Tariffs likely to raise inflation in coming quarters; more persistent effects possible."
"Becoming clear that tariff increases will be significantly larger than expected; same is true of economic effects."
"Most measures of long-term inflation remain well-anchored."
"Fed's obligation is to make certain that one-time increase in price levels doesn't become an ongoing inflation problem."
"Data show solid growth, labor market in balance, inflation much closer to, but still above, 2% goal."
"Surveys show dimming expectations, higher uncertainty due to new federal policies, especially trade."
"Fed is closely watching tension between hard and soft data."
"Unemployment rate still in low range, job market not a source of inflation."
"Progress toward 2% inflation goal has slowed."
Market reaction to Powell's speech
The US Dollar (USD) holds its ground following these remarks. At the time of press, the USD Index was up 0.7% on the day at 102.65.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.65% | 1.33% | -0.15% | 0.85% | 4.87% | 3.69% | -0.36% | |
| EUR | -0.65% | 0.72% | -0.78% | 0.27% | 4.20% | 3.07% | -0.95% | |
| GBP | -1.33% | -0.72% | -1.49% | -0.47% | 3.48% | 2.33% | -1.66% | |
| JPY | 0.15% | 0.78% | 1.49% | 0.98% | 4.98% | 3.75% | -0.22% | |
| CAD | -0.85% | -0.27% | 0.47% | -0.98% | 3.93% | 2.78% | -1.19% | |
| AUD | -4.87% | -4.20% | -3.48% | -4.98% | -3.93% | -1.11% | -4.97% | |
| NZD | -3.69% | -3.07% | -2.33% | -3.75% | -2.78% | 1.11% | -3.90% | |
| CHF | 0.36% | 0.95% | 1.66% | 0.22% | 1.19% | 4.97% | 3.90% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
