Jerome Powell, the Federal Reserve Chair, warned that President Trump's global tariffs could result in both increased inflation and unemployment. During a speech, Powell highlighted that tariffs are likely to push inflation temporarily higher, with possible persistent effects. He noted that the economic impacts of the trade policies could lead to slower growth as well. While he refrained from discussing recession prospects, he acknowledged that JP Morgan escalated their recession risk assessment from 40% to 60%. This reflects heightened market uncertainty following recent policy decisions.
While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.
Looking ahead, higher tariffs will be working their way through our economy and are likely to raise inflation in coming quarters.
The size and duration of these effects remains uncertain, but tariff increases will be significantly larger than expected.
JP Morgan revised their recession outlook up from 40 percent to 60 percent following President Trump's tariff announcement.
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