By Katherine Tinsley
2:28am PDT, Apr 18, 2025
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"These are very fundamental policy changes," Jerome Powell said of Donald Trump's plans during an event for the Economic Club of Chicago on Wednesday, April 16. "There isn't a modern experience of how to think about this."
"The level of the
tariff increases announced so far is significantly larger than anticipated," he added.
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Jerome Powell noted that Donald Trump's hopes to "make America great again" might not align with what the nation needs.
"We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension," Powell said.
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While Donald Trump hopes to bring manufacturing jobs and businesses back to the U.S., economic experts don't envision that occurring.
"Unemployment is likely to go up as the economy slows," Jerome Powell predicted.
According to the investment banker, inflation "in all likelihood" will increase as a portion of the burden caused by tariffs will be "paid by the public."
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Chicago Fed President Austan Goolsbee shared a similar sentiment in New York.
"A tariff is like a negative supply shock," Goolsbee said, according to CNN. "That's a stagflationary shock, which is to say it makes both sides of the Fed's dual mandate worse at the same time."
"Prices are going up while jobs are being lost and growth is coming down, and there is not a generic playbook for how the central bank should respond to a stagflationary shock," he continued.
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Jerome Powell said if stagflation becomes a reality, "we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close."
"We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses," he added.
