Fed Chair Powell warns of slower growth amid Trump’s tariff policies

Powell: The US central bank holds the policy rate in the 4.25%-4.50% range. Policymakers expect two rate cuts in 2025—economic growth witnessed at 1.7% in 2025, inflation higher at 2.7%.

Trump Pressures Fed for Rate Cuts

Federal Reserve Chair Jerome Powell warned on Wednesday that the Trump administration’s tariff policies could slow economic growth and drive inflation higher in the near term. His remarks triggered a strong reaction from President Donald Trump, who took to Truth Social to urge the Fed to cut interest rates.

“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing,” Trump posted late Wednesday.

The Fed’s Stance: Uncertainty & Economic Concerns

The Federal Reserve decided to hold interest rates steady at 4.25%-4.50%, citing “unusually elevated” economic uncertainty. Powell explained that while the Fed still anticipates two rate cuts by the end of the year, the overall economic outlook remains clouded by shifting trade policies and inflation risks.

“There is just really high uncertainty. What would you write down?” Powell told reporters, referring to the difficulty in making economic projections under current conditions.

Tariffs & Inflation Risks

The new tariffs on imports from key trading partners are expected to raise costs for businesses and consumers, contributing to higher inflation despite the Fed’s long-term goal of price stability. Powell noted that economic sentiment has turned negative, possibly due to “turmoil at the beginning of an administration that’s making big changes.”

U.S. Economy: Solid But Cautious

Despite concerns, Powell pointed to strong economic indicators, such as a 4.1% unemployment rate, which suggests that the labor market remains stable. However, the Fed remains cautious about how tariff policies, inflation trends, and slowing growth could impact the broader economy.

With Trump pushing for aggressive rate cuts and the Fed maintaining a cautious stance, the tension between the White House and the central bank is expected to continue as policymakers navigate a volatile economic landscape.