Federal Reserve Chair Jerome Powell said Wednesday that President Donald Trump’s quickly evolving tariff policies could put the central bank in a difficult position.
“The level of the tariff increases announced so far is significantly larger than anticipated,” Powell said in prepared remarks at the Economic Club of Chicago. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
Powell said that could risk friction between the Federal Reserve’s dual mandates: To achieve maximum employment and stable prices.
“As we act to meet that obligation, we will balance our maximum-employment and price-stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans,” he said. “We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension.”
Trump has repeatedly called on the Federal Reserve to lower interest rates, but the president has limited authority over the independent agency.
Congress structured the Federal Reserve to avoid political pressure. Members of the Board of Governors are appointed for staggered 14-year terms, and the Board Chair is appointed for a four-year term.
Powell quoted one of Chicago’s famous fictional characters, Ferris Bueller, from the 1986 John Hughes’ film “Ferris Bueller’s Day Off.”
“As that great Chicagoan Ferris Bueller once noted, ‘Life moves pretty fast.’ For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said. “We continue to analyze the incoming data, the evolving outlook, and the balance of risks. We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses. We will continue to do everything we can to achieve our maximum-employment and price-stability goals.”
