Jerome Powell stated that President Trump's tariffs have delayed potential interest rate cuts demanded by Trump. Powell noted the Fed's assessment of inflation was impacted by these tariffs, indicating they halted decisions upon seeing tariff sizes. Inflation forecasts for the U.S. increased significantly due to tariffs, which are generally expected to be inflationary as costs may transfer to consumers. Powell mentioned uncertainty about the timeline and effects of inflation as they monitor the situation closely for any changes throughout the summer.
In effect we went on hold when we saw the size of the tariffs. Essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs.
I think that's right. Economists generally expect tariffs to be inflationary, as the costs of paying them tends to be passed on to consumers.
We haven't seen effects much from tariffs, and we didn't expect to by now. We've always said the timing, amount and persistence of the inflation would be highly uncertain.
We're prepared to learn that it can be higher, or lower, or later or sooner than we'd expected.
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