"Could Face More Difficult Situations Than Expected"... Powell Warns on Trump's Tariffs

Jerome Powell, the chair of the U.S. Federal Reserve (Fed), warned that higher-than-expected tariffs from the Donald Trump administration could lead to price increases and slowed growth, indicating that the Fed might face a difficult situation in choosing whether to focus more on inflation or growth.

In a speech at the Economic Club of Chicago in Illinois on the 16th (local time), Powell stated, "Tariffs are likely to cause at least a temporary increase in inflation," expressing this concern.

Powell noted, "The level of tariff increases announced by the administration so far is much higher than expected," and predicted, "The impact on the economy is likely to be similar, including rising inflation and slowing growth."

He emphasized, "We could face a challenging scenario where our dual goals (maximum employment and price stability) are in tension," adding, "If that happens, we will consider how far the economy is from each goal and the potential timing differences in closing the gaps between each goal and reality."

The Fed aims to maintain maximum employment while reducing inflation to 2%. In this context, Powell's remarks are interpreted to mean that tariffs could impose significant burdens on both sides, making it difficult to achieve the dual goals simultaneously. Powell expressed concern that tariffs "are likely to move us further away from our goals throughout the year."

However, he reaffirmed the existing stance of not considering adjustments to monetary policy, such as lowering the benchmark interest rate, for the time being, and instead observing the economic situation further. He added, "Currently, we are well-positioned to wait for more clarity before considering any adjustments to our policy stance."

Shin Hyun-bo, Hankyung.com reporter greaterfool@hankyung.com