Fed chair says tariffs could drive inflation as Trump calls for interest rate cuts

• President Trump called for immediate interest rate cuts just before Fed Chair Jerome Powell’s speech Friday. Powell signaled caution, emphasizing uncertainty around Trump’s tariffs.
• Powell warned that Trump’s tariffs could result in higher inflation and slower economic growth.
• The Fed held interest rates steady last month and plans to reassess at its next meeting in early May.

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President Donald Trump posted to Truth Social on Friday, April 4, calling for an immediate cut to interest rates just moments before Federal Reserve Chair Jerome Powell delivered remarks in Arlington, Virginia.

Powell warns of economic impact of tariffs

During his speech, Powell suggested Trump’s tariffs were “higher than expected” and warned that they could increase inflation and slow economic growth.

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

Acknowledging strength, noting uncertainty

Speaking to a group of business journalists, Powell acknowledged the strength of the U.S. economy, citing positive labor market data.

“The economy is still in a good place,” he said.

However, he emphasized the high level of uncertainty, pointing to “substantial changes” occurring in U.S. policy under the Trump administration — specifically in areas including immigration, trade, fiscal policy and regulation.

“The new administration is in the process of implementing substantial policy changes in four distinct areas, trade, immigration, fiscal policy and regulation,” Powell said. “Our monetary policy stance is well positioned to deal with the risks and uncertainties we face as we gain a better understanding of the policy changes and their likely effects on the economy.”

Fed taking ‘wait-and-see’ approach

Powell said the Federal Reserve is taking a wait-and-see approach as these policy shifts unfold.

“The Fed is well positioned to wait for greater clarity before making any decisions about adjusting interest rates,” he said.

Trump urges Powell to act

Trump’s post on Truth Social came just moments before Powell’s remarks. In his post, the president urged the Fed to act immediately.

“This would be a PERFECT time for Powell to cut Interest Rates,” the president wrote. “Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months — A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

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Fed to meet in May

In March, the Federal Reserve left interest rates unchanged. Central bankers are scheduled to meet again in early May.