Powell Sounds Alarm: US Tariffs Could Trigger Inflation Surge, Job Losses & Stagflation

April 17, 2025 – DailyForex.pk
In a rare moment of blunt honesty, Federal Reserve Chair Jerome Powell openly criticized the Trump administration’s trade tariffs, warning they could push the U.S. economy off track. Speaking at the Economic Club of Chicago, Powell said the new policy measures are “likely to move us away from our goals,” hinting at rising risks of recession and stagflation.

📊 Powell: Economic Gains in 2024 Now Under Threat

Reflecting on the previous year, Powell noted that 2024 delivered 2.4% GDP growth, low unemployment in the “low fours,” and inflation cooling to 2.5%. But 2025, he warned, presents a very different picture.

“With new tariffs being rolled out, inflation is likely to rise again and unemployment could climb as the economy slows,” Powell cautioned.
“We’ll likely see setbacks on our dual mandate—maximum employment and price stability—at least for the rest of the year.”

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💡 Key Fed Concerns: Supply Chains, Tariffs, and Stagflation

Powell drew parallels between today’s situation and pandemic-era disruptions, highlighting how supply chain issues can create prolonged inflation, especially in sectors like auto manufacturing.

“Car companies are already facing disruptions. We may see another extended inflation cycle as supply chains buckle under trade restrictions,” he warned.

The Fed Chair also acknowledged the growing risk of stagflation—a dangerous combination of rising inflation and job losses.

“We’re experiencing impulses for both higher inflation and higher unemployment, which puts central banks in a tough spot. Our tools can’t tackle both simultaneously,” Powell added.

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💼 No ‘Fed Put’ This Time: Markets Must Adjust Without Rescue

When asked about the so-called ‘Fed Put’—a belief that the central bank will cut rates to stabilize falling markets—Powell dismissed the notion:

“No, markets are digesting major uncertainties, particularly around trade policy. They’re volatile but functioning as expected.”

He also addressed the recent spike in Treasury yields, calling it a result of “deleveraging among hedge funds” and broader market uncertainty.

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🏛 Fed Slows Balance Sheet Reduction Amid Market Strain

The Fed recently voted to cut its bond sales by 75%, with Powell explaining the decision:

“We chose to slow the pace rather than pause. That gives us more flexibility to shrink the balance sheet without causing market disruptions.”

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💸 National Debt Woes: Powell Urges Real Focus on Entitlements

Powell highlighted a long-term concern: the growing U.S. federal debt. While the debt isn’t at a crisis level, the path is unsustainable.

“Medicare, Medicaid, Social Security, and interest payments are where real spending growth lies. Yet the conversation always focuses on domestic discretionary spending—which is shrinking.”

He emphasized that bipartisan reform is needed to address the true drivers of the debt crisis, beyond political soundbites.

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⚖️ Fed Independence: Powell Unfazed by Supreme Court Review

Addressing concerns over the Fed’s independence in light of potential Supreme Court rulings, Powell maintained confidence in the institution’s legal protections.

“Our independence is protected by statute. It has strong bipartisan support. While we’re watching the situation, I don’t believe it will affect the Fed.”

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🔍 Conclusion: Powell’s Warnings Signal Turbulent Times Ahead

With tariffs fueling inflation, supply chains under threat, and rate cuts off the table, he painted a cautious but clear picture: the U.S. economy is headed into rough waters. For forex and commodities traders, these developments hint at volatile markets, currency shifts, and potential safe-haven moves into gold.

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