Donald Trump recently sparked an economic shock wave by announcing new customs tariffs. In response, Jerome Powell, the president of the Federal Reserve (Fed), warned that these measures may worsen inflation while slowing growth. What will be the impact on interest rates? Discover it here.
Jerome Powell worried about Trump's prices
On April 2, 2025, Donald Trump's announcement concerning a new series of customs tariffs caused an immediate fall in the financial markets. This decision, although expected by some, was perceived as a shock for many investors and economists, who fear an intensification of trade tensions. In response to this initiative, the president of the Fed, Jerome Powell, expressed major concerns.
In a recent declaration, Powell stressed that the prices imposed by Donald Trump were larger than expected and that they risk stimulating inflation while slowing economic growth:
Planned customs tariff increases will probably have an inflationary impact in the coming quarters. Although uncertainty remains, it is now obvious that prices increases are greater than expected, probably resulting in higher inflation and slower growth. The effects could last longer than expected.
What impact on interest rates?
The central question which arises is that of the orientation of interest rates of the Fed Faced with this situation. So far, the federal reserve has opted for relatively low rates to stimulate the economy, but Trump's recent decisions could force Jerome Powell and his colleagues to review this strategy. If Trump's customs tariffs actually lead to inflationary pressure, this could encourage the Fed to increase interest rates to contain prices.
However, slower economic growth could also encourage Fed to take accommodating measures, such as rate reductions, to support economic activity. Consequently, it is difficult to predict whether Powell will choose to raise or lower the rates in the coming months. However, the balance between inflation and growth will be decisive in this decision.
This reaction by Jerome Powell comes 24 hours after France and Europe decided to counter-attack in the face of Trump's customs prices! Highlighting the challenges that Europe and the American economy could be confronted in the coming months. Investors and analysts will have to closely monitor the next developments to anticipate the adjustments of the US monetary policy.
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