Trump Tariffs Could Delay Inflation Progress and Rate Cuts for a Year, Powell Says

Just 12 minutes into Jerome Powell’s press conference on Wednesday, I found myself startled, blurting out, “Wait, what did he just say?” It was at that moment the Federal Reserve chairman, in his typically careful and roundabout language, suggested something that could have big implications for U.S. monetary policy: he hinted that under certain conditions, Donald Trump’s proposed tariffs could potentially delay interest rate cuts by as much as a year.

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Powell didn’t say this outright — in fact, his statement was so indirect that even the financial markets didn’t seem to pick up on it. After the press conference ended, I checked CME’s data tracking rate expectations, and the market’s predictions for interest rates in April and May of 2026 were essentially unchanged from before the Fed’s meeting. It was as if Powell’s remark had slipped past everyone.

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But what he essentially communicated was that the new tariffs might “delay … at least for the next, let’s say, year” the Fed’s progress toward achieving its inflation goals. That would translate to no additional progress in pushing inflation down to the Fed’s 2% target, and potentially, no rate cuts during that time. Of course, Powell made sure to qualify his statement, saying this was just one possible outcome and depended on how the tariffs played out.

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It’s both fascinating and frustrating. As Powell has emphasized repeatedly — not just during this press conference, but throughout the past seven years — the Fed remains data-driven. They won’t lower interest rates until the data clearly show the U.S. economy making consistent progress toward the 2% inflation target. If you want to hear the key exchange for yourself, check the video recording of the press conference at the 1 hour, 11 minutes, and 27 seconds mark, where Bloomberg’s Jonnelle Marte poses the critical question.

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Interestingly, I don’t even trust the money markets anymore to confirm whether I’m interpreting Powell’s remarks correctly. A few years ago, I watched another one of these post-meeting press conferences where Powell all but spelled out,

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“We will not be cutting rates this year,” yet afterward, the bond markets, money markets, and financial pundits were still eagerly anticipating several cuts. (They were wrong that time.) You’d think the markets would understand the signals, but in reality, they often misread them.

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Powell’s tariff comment wasn’t the only notable moment from Wednesday’s event. These Federal Reserve press conferences often resemble a kind of performance — a “kabuki theater,” if you will — where journalists pose questions that may appear meaningful but often aim more to secure on-camera moments for their editors and families, while Powell carefully navigates his responses to avoid causing market shocks.

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Despite the delicate atmosphere, Powell — who has spent the last month facing public taunts from President Trump, who has even threatened to fire him — managed to respond to these provocations without ever directly addressing them.

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He stayed composed, declining to comment on Trump’s personal attacks, but repeatedly emphasized that the administration’s tariff push was increasing the risks of both higher unemployment and higher inflation.

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“We’ve judged that the risks to higher employment and higher inflation have both risen — and this, by the way, of course, is compared to March,” Powell said. “If you look at where forecasters are, they’re all forecasting an increase in inflation … and then we’ve also got, you know, forecasts of weakening in the economy, and some have recession forecasts.”

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Without explicitly stating it, Powell was effectively drawing a contrast between the stability of the U.S. economy under President Biden and the uncertainty now introduced by Trump’s trade actions. He noted that the economy “still … looks like it’s growing at a solid pace” and described it as “healthy” and “resilient.” But the new environment created by tariff threats was clearly adding pressure and uncertainty.

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At the same time, Powell made sure to clarify that he wasn’t forecasting a return to the dreaded 1970s-style “stagflation,” where the Fed has to deal with both rising inflation (which would normally require higher rates) and rising unemployment (which would argue for cutting rates).

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Still, the fact that Powell dedicated so much time and detail to discussing the possibility showed that both he and the Federal Open Market Committee (FOMC) are giving it serious consideration. It makes you wonder: why are they spending so much energy thinking about this scenario now?

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Overall, while much of the media and market attention after Wednesday’s Fed meeting stayed focused on the expected headline points, Powell’s subtle warnings and careful language revealed deeper concerns. If tariffs do end up undermining inflation progress, the widely expected path of rate cuts could be postponed far longer than many investors currently assume — even if the markets themselves haven’t fully absorbed that possibility yet.

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