Jerome Powell warns Trump’s tariffs: “highly likely to raise prices,” “continuous volatility” in the market, and the looming threat of stagflation

• Inflation could rise and growth could slow down As a result of President Donald Trump’s tariff policy, according to Federal Reserve Chairman Jerome Powell. In a speech Wednesday, Powell said inflation would not remain because the Fed’s biggest goal is to limit the rise in prices from Trump’s tariffs to one-off events.

Federal Reserve Chairman Jerome Powell has heard the strongest warning ever about the impact of President Donald Trump’s repeated tariffs.

“The levels of tariff increase announced so far are significantly greater than expected, and the same could be the case with the economic impact, including higher inflation and slower growth.”

Powell said he repeated the points he made earlier this month that tariffs would cause slower inflation and growth. They also weigh heavily on the expectations the business had about the economy.

“The household and business surveys report a sharp decline in outlook sentiment and growing uncertainty around the outlook, primarily reflecting trade policy concerns,” Powelll said.

The economy is currently facing “higher risks on the bottom,” Powell added. This sternly acknowledges the possibility of an economic recession against the usual prudent role of the Federal Reserve Chairman.

In Powell’s time Latest Comments Earlier this month, the White House retracted and replicated many parts of the original broad customs policy. Most notably, Trump Pause Tariffs announced in all countries on April 2nd Excluding Chinawas hit by additional taxation. His administration later admitted it Exemption Until Trump personally intervened, he would be able to take certain products such as smartphones and semiconductors. Reverse course Regarding those exemptions. The constant front and back of uncertainty was behind companies and investors.

Powell thought that “probably” tariffs would raise prices, but the key question the Fed still rated is how long they will be.

“Our duty is to fully secure long-term inflation expectations and ensure that one-time rise in price levels does not become an ongoing inflation issue,” he said.

One of the key indicators the Fed monitors in evaluating the economy is long-term inflation expectations. If they rise, it would be seen by business leaders, investors and the public as a chronic problem that will not go away. When that happens, they are much more likely to cut their spending, which only increases the chances of a recession.

In the latest CPI report in March, the inflation rate was 2.4%, slightly lower than expected. But that read came before Trump implemented his tariff policies.

Since Powell last spoke, the economic turmoil of Trump’s tariffs has come from the stock market Bond Market. Treasury yields for 10 and 30 years have skyrocketed at the same time as the US, with global stocks being craters. It gave a sign that scary investors were pulling their money out of stocks, and instead of parking it on US bonds, it considered the safest investment in the world, but in reality sale The same goes for these assets. These dynamics demonstrate an unprecedented lack of faith in the US economy.

“I have no modern experience with how to think about this,” Powell said of the recent customs policy.

Powell said the bond market movement was unusual.

“It is a market that handles historically unique developments and has great uncertainty.

As customarily, Powell did not lean towards future monetary policy moves or when it would happen. Instead, Powell said the relative strength of the US economy bought Fed time before it had to make a decision.

“For the time being, we are well positioned to wait for more clarity before we consider adjusting our policy attitude,” he said.

Trump’s tariffs are almost certain to raise prices for businesses and consumers, which will hamper years of efforts by the Fed to reduce inflation. In that scenario, hiking rates may be guaranteed. But that will be a reversal from the rate-cut cycle that the Fed has been experiencing since September. At the same time, as the US economy enters a recession, fee reductions are guaranteed. The worst case scenario is stagflation when inflation is high and the economy is not growing. Powell defined that particular scenario as a “challenging” scenario, and defined the double mission goal of the Fed’s full employment and stable prices as “tension.”

“It’s a difficult place for a central bank to enter,” Powell said.

In short, the extent to which the Fed will do or should do is expand.

The market is currently priced two or three interest rate cuts starting in the second half of 2025. However, these plans can change given how unstable there are across the economy.

“The market suffers from a lot of uncertainty, which means volatility,” Powell said.

This story was originally introduced Fortune.com