Fed Chair To Senate: Tariffs May Trigger Persistent Inflation, Slowing Rate Cut Plans

WASHINGTON— Federal Reserve Chair Jerome Powell told a U.S. Senate panel Wednesday that while the Trump administration’s tariffs may lead to a one-time spike in prices, the risk of more persistent inflation is significant enough for the central bank to proceed cautiously with any further interest rate cuts, Reuters reported.

Although economic theory suggests tariffs are typically a temporary shock to prices, “that is not a law of nature,” Powell said, explaining that the Fed wants greater clarity on the scope of the tariffs and their impact on pricing and inflation expectations before making additional moves on borrowing costs, Reuters said.

"If it comes in quickly and it is over and done then yes, very likely it is a one-time thing," that won't lead to more persistent inflation, Powell said. But "it is a risk we feel. As the people who are supposed to keep stable prices, we need to manage that risk. That's all we're doing," through holding rates steady for now, Reuters said.

Federal officials still anticipate cutting interest rates this year, but the timing remains unclear as they await upcoming trade deadlines and seek greater clarity on the extent of the tariffs and how rising import duties may affect prices and overall economic growth, Reuters added.