Federal Reserve Chair Jerome Powell voiced his concerns today, stating that the newly announced tariffs from the Trump administration are surprisingly high. He suggested these measures are likely to bring about both increased inflation and a slowdown in economic expansion. Powell also emphasized that the Fed isn’t in a hurry to make any sudden shifts in policy, preferring to observe and gain a clearer picture of the situation first.

“While a level of uncertainty is still present, it’s becoming increasingly apparent that these tariff hikes are going to be significantly larger than anticipated. It’s also probable that the economic fallout will be more substantial too, with expectations of rising inflation coupled with a deceleration in growth,” Powell explained in his prepared remarks at the Society for Advancing Business Editing and Writing’s annual conference.

Turning his attention to the current health of the American economy, Powell pointed out that it’s still “in pretty good shape,” characterized by robust growth, a stable job market, and inflation slightly above the Fed’s target of 2%. However, he did caution that these newly imposed federal tariffs could create complications when deciding the future direction of monetary policy.

“These increased tariffs will gradually work their way into our economy and are very likely to push inflation higher in the coming months,” Powell clarified.

The Trump administration made headlines on Wednesday with the unveiling of a significant tariff strategy. This involves setting a minimum 10% tariff on essentially all goods brought into the country from abroad, and even steeper tariffs on products from nations with large trade surpluses with the United States. Economic experts are already sounding the alarm, warning that this fresh trade approach could easily escalate effective tariffs beyond 25%, potentially fueling inflation while simultaneously putting a drag on economic expansion.

The head of the Federal Reserve explained that how the central bank reacts to these unfolding events will hinge on several key elements, such as the precise details of the tariffs, how long they are expected to last, and the possibility of retaliatory actions from our trading partners.

“We feel it’s best to take a measured approach and wait for more certainty to emerge before we consider making any changes to our current policy.” He added, “Right now, it’s just too early to determine what the appropriate course of action for monetary policy should be.”

Powell’s Friday comments come on the heels of recent economic data indicating that inflation pressures are still quite present. Specifically, core PCE prices, which is the Fed’s preferred way to measure inflation, showed a 2.8% increase compared to February of last year.

Powell acknowledged that progress in bringing inflation down to the Fed’s 2% target has slowed a bit recently. He also noted that the newly announced tariff increases could very well worsen the inflation situation in the months ahead.

Despite these potential inflationary headwinds, Powell did stress that inflation expectations are still “well anchored,” and reassured listeners that the Federal Reserve is committed to preventing any temporary inflation spike caused by tariffs from becoming a long-term issue.

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