US Fed chair warns tariffs likely to push up inflation as Trump urges rate cuts

The recent tariffs introduced by President Donald Trump have increased the risk of higher unemployment and are likely to cause inflation to rise and growth to slow, Federal Reserve Chair Jerome Powell said on Friday.

“It is now becoming clear that the tariff increases will be significantly larger than expected,” Powell told an event in Virginia in prepared remarks.

“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 making changes to US monetary policy.

His comments suggest the Fed is in no rush to cut its benchmark lending rate from its current elevated level of between 4.25 and 4.5 per cent, as it continues its struggle to bring inflation down to its long-term 2 per cent target.

Trump’s announcement earlier this week of heavy levies against top trading partners has rocked global markets as investors have grappled with the prospect of significantly higher import costs on everything from shoes to shrimp.

But ahead of Powell’s speech on Friday, Trump took to his Truth Social account to insist that his policy would not change despite the market reaction, and called on Powell to act.

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