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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →On April 16, 2025, Federal Reserve Chair Jerome Powell said tariffs were highly likely to raise inflation at least temporarily and could have more persistent effects. The Fed, he said, was “well positioned to wait for greater clarity” before adjusting its policy stance. He did not announce when the next rate cut would come.
Will tariffs cause inflation?
Powell’s answer was that tariffs were highly likely to cause at least a temporary rise in inflation. In prepared remarks at the Economic Club of Chicago, he also cautioned that the effects could last longer. That was a risk he said policymakers needed to assess, not a prediction that persistent inflation was inevitable.
Tariffs can raise the prices of imported goods and inputs used by businesses. A one-time increase in the price level is different from inflation that keeps rising: prices can jump as tariff costs pass through, then stop accelerating if the shock fades and expectations remain stable. Powell said the Fed’s concern was to prevent a one-time price increase from turning into an ongoing inflation process.
He identified three things policymakers needed to judge: how large the effects would be, how long tariff costs would take to show up in prices, and whether longer-term inflation expectations stayed anchored. The Fed’s stated inflation objective is 2 percent.
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Why was the Fed waiting before cutting rates?
Powell said the announced tariff increases were substantially larger than anticipated, and their likely effects included both higher inflation and slower economic growth. With uncertainty about the scale and timing of those effects, he said the Fed could wait for more information before changing policy.
That caution did not amount to a promise to hold rates for a set period, nor did Powell give a date for another cut. He framed decisions around incoming data, the evolving outlook, and the balance of risks. His April 16 statement was that the Fed was positioned to wait for greater clarity before considering adjustments.
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How could tariffs put the Fed’s goals in conflict?
The Fed’s dual mandate is maximum employment and stable prices. Tariffs could put pressure on both sides of that mandate: higher costs may lift prices, while trade uncertainty and weaker growth could weigh on businesses and employment.
Powell said policymakers could face a scenario in which the goals were in tension. If they did, they would consider how far the economy was from each goal and how quickly the gaps were likely to close. This is why the tariff question was not simply whether inflation might rise; the Fed also had to weigh the possible effects on growth and jobs.
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What economic figures did Powell cite in April 2025?
Powell’s speech included a snapshot of conditions at the time. He cited estimates that total PCE prices had risen 2.3 percent over the 12 months ending in March 2025 and core PCE prices had risen 2.6 percent over that same period. He also said nonfarm payrolls had grown by an average of 150,000 jobs a month during the first three months of 2025. These are figures from his April 16, 2025 remarks, not current readings.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What Powell’s remarks do—and do not—establish
The central message was caution in the face of uncertainty: tariff-driven inflation was likely to appear at least temporarily, persistence was possible, and the Fed wanted more clarity before adjusting policy. Powell’s comments do not establish a specific rate-cut schedule or, on their own, describe the Fed’s position in October 2026.
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For the original statement, read the Federal Reserve’s April 16, 2025 prepared remarks. For context, the Associated Press reported on Powell’s April 4 comments, and Reuters covered his June 2025 congressional testimony, when officials were still assessing tariff pass-through and inflation risks.
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