In a striking statement, Federal Reserve Chair Jerome Powell has said the central bank would have reduced interest rates earlier if not for the inflationary pressures caused by former President Donald Trump’s tariff policies.
“We were on track for easing, but trade wars and the inflation they brought made that impossible,” Powell said during a monetary policy forum in Washington.
🔍 Context: The Tariff Effect
The Trump administration imposed a series of tariffs between 2018 and 2020, targeting Chinese imports and other global trading partners. According to Powell, these trade barriers stoked inflation, limiting the Fed’s ability to implement rate cuts to support the economy.
📊 Key Takeaways from Powell’s Comments:
Tariffs Disrupted Inflation Projections:
The Fed expected inflation to ease, but the imposed tariffs led to persistent price pressures, particularly on consumer goods.
Rate Cut Plans Derailed:
“Had tariffs not been enacted, we likely would have pursued a more accommodative policy,” Powell noted.
Trade Policy Matters for Monetary Strategy:
This rare instance of a central bank leader critiquing past government policy highlights the intersection of fiscal and monetary decision-making.
Inflation Still Lingers:
Despite recent improvements, the Fed remains cautious, as residual inflation from those policies continues to affect core prices.
📈 Market Reaction
Bond yields rose slightly, as traders recalibrated expectations for rate cuts.
US Dollar strengthened, signaling reduced odds of easing in the short term.
Wall Street remained steady, with analysts interpreting Powell’s remarks as hawkish but honest.
❓ FAQs
Q1: What did Jerome Powell say about Trump’s tariffs?
A: He said the Federal Reserve would have cut interest rates if not for the inflation caused by tariffs imposed during Trump’s presidency.
Q2: Why do tariffs affect interest rates?
A: Tariffs increase the price of imported goods, pushing inflation higher. Central banks typically avoid rate cuts in such scenarios to prevent further inflation.
Q3: When were the Trump tariffs enacted?
A: Between 2018 and 2020, primarily targeting Chinese goods, steel, aluminum, and some European imports.
Q4: What does this mean for future Fed policy?
A: It signals that the Fed may remain cautious with rate cuts, depending on inflation trends and global trade dynamics.
Q5: Is this a political comment from Powell?
A: While rare, Powell’s comment reflects the real-world impact of fiscal policies on monetary decisions rather than political alignment.
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Reported by Benny on June 25, 2025.
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