Federal Reserve Chair Jerome Powell has stated that officials are not in a hurry to adjust interest rates, despite the possibility that tariffs could cause an increase in inflation and unemployment rates. Powell emphasized that if the recently announced tariffs are sustained, there could be a potential rise in inflation, which could slow economic growth and raise unemployment rates.

The effects of inflation could be short-lived, reflecting a one-time price level shift, according to Powell. However, there is a possibility that the inflationary effects could be more persistent. Policymakers expressed a growing concern about the risk of rising inflation and unemployment amidst this uncertainty.

Despite this, Powell reiterated that Fed officials are currently comfortable with keeping the rates unchanged until they gain a better understanding of the economy’s direction. He also emphasized the importance of patience in managing this situation, stating, We think we’re in the right place to wait and see how things evolve. We don’t feel like we need to be in a hurry. We feel like it’s appropriate to be patient.

This stance on keeping tariffs from affecting a lasting rise in inflation was backed by several Fed officials, who expressed that they would not support lowering interest rates preemptively to protect against a slowing economy. As for President Trump’s trade policy, it has led to a level of uncertainty across the economy. Economists widely predict that the expansive tariffs could boost inflation and weigh on growth.

While concerns about a possible recession have grown, and some businesses reportedly paused investment decisions due to the uncertainty, the labor market remains resilient. In spite of the impact of tariffs on sentiment and a surge in imports, the U.S. economy is still developing at a solid pace.

Even though President Trump has been critical of Powell’s decision not to lower rates, the Fed said it would continue to shrink its balance sheet at the reduced pace announced during their March meeting.

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