The position is significant with markets concerned that President Donald Trump’s tariffs could spark a broader global trade war that again would make inflation a problem for the U.S. economy. Inflation had appeared to be on the run heading into this year, but the outlook is less certain now.
Back in 2021, when inflation first rose past the Fed’s 2% target, Powell and his colleagues repeatedly said they expected the move to be transitory, brought on by Covid-specific factors impacting supply and demand that ultimately would fade. However, inflation kept rising, eventually hitting 9% as measured by the consumer price index, and the Fed was forced to respond with a series of aggressive interest rate hikes not seen since the early 1980s.