Fed's Powell: Tariffs Raise Inflation and Slow Down Economy, Fed Could Be Stuck

BlockBeats News, May 9th, Federal Reserve's Powell said Trump's trade policy could potentially drive up inflation, slow economic growth, and raise unemployment later this year, putting policymakers in a tough spot on which problem to address. Powell said, "The recent escalation of tariffs is unprecedented in the current environment, and we don't really know how that's going to work out. We will, as we always do, act to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective."

However, he pointed out the risks are clear. "I think that higher tariffs would lead to disruptions and costs in the global supply chain, and those costs would lead to higher prices for consumers. We saw that very clearly in the 2018-19 episode, where we had a number of tariffs, not only on consumer goods but also parts of the capital goods sector." Powell added, "In addition, trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States."