“Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”
Powell, whose term as Fed chair is set to expire in May 2026, made no direct mention of Trump in his remarks Wednesday at the Economic Club of Chicago. However, his speech underscored the Fed’s cautious approach to interest rate policy in light of economic uncertainty, much of it stemming from the very tariffs Trump hailed.
“As that great Chicagoan Ferris Bueller once noted, ‘Life moves pretty fast,’” Powell said. “For the time being, we are well positioned to wait for greater clarity” on how policy changes in areas such as immigration, taxation, regulation, and tariffs might play out.
Financial markets reacted negatively to Powell’s remarks. Markets were hit by a double whammy of Powell’s tariff caution and a China-related warning from Nvidia. The Dow Jones Industrial Average slid nearly 700 points, or 1.7%. The tech-heavy Nasdaq Composite plunged 3.07%, nearing bear market territory, while the S&P 500 dropped 2.24%.
Nvidia shares sank 6.9%, marking their worst day since January, after the chipmaker disclosed a $5.5 billion quarterly charge. The hit stems from new US export restrictions that require licenses to ship its H20 graphics processing units to China and several other countries, the company revealed in a regulatory filing.
The Fed chair acknowledged that the scale of the new tariffs was “significantly larger than anticipated” and warned that the economic impact could include “higher inflation and slower growth.” He added that such developments could place the Fed in a difficult position, potentially forcing a choice between combating inflation and stimulating employment—two goals that often require opposing actions.
“Our tool only does one of those two things at the same time,” Powell said in a follow-up Q&A session, referring to interest rate adjustments.
While Powell said the inflationary effects of tariffs are expected to be temporary, he admitted they “could also be more persistent,” echoing the views of a majority of the Fed’s rate-setting committee.
Recent data suggest the US economy remains resilient, with strong hiring numbers and a dip in inflation in March. However, falling consumer and business confidence has economists concerned that spending and investment could falter.
Powell said those concerns are valid, particularly given the scale of the policy changes underway.
“These are very fundamental changes in long held… policies in the United States,” he said. Drawing a historical parallel, he noted, “The Smoot-Hawley tariffs were actually not this large and they were 95 years ago. So there isn’t a modern experience of how to think about this.”
If the uncertainty surrounding trade policy persists, Powell warned, it could discourage companies from investing—a key driver of economic growth.
“That would weigh on… investment, just in general,” he said.
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