Fed Chair Powell warns tariffs could raise inflation

Federal Reserve Chair Jerome Powell warned Wednesday that tariffs could force the central bank to choose between fighting inflation and supporting growth.

Speaking in Chicago, Powell said, “We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension.” If the central bank is faced with a choice between growth and keeping inflation down, it would “consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” and then take steps as to how to go ahead.

Powell said tariffs may worsen inflation “for the balance of this year.”

The Atlanta Fed now expects GDP to shrink by 0.1%.

Despite this, he gave no hint of rate changes, saying the Fed is “well positioned” to wait. Stocks dipped, and Treasury yields fell during his remarks.

Meanwhile, the World Trade Organization (WTO) predicts global trade will fall 0.2% in 2025, reversing its earlier 2.7% growth forecast.

It blames US tariffs and global uncertainty. North America could see trade drop over 10%. Still, Asia and Europe may post modest growth. Services trade, like tourism and finance, is expected to grow 4%, down from earlier estimates.