Well-Anchored

If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.  The effects on inflation could be short-lived, reflecting a one-time shift in the price level.  It is also possible that the inflationary effects could instead be more persistent.  Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately on keeping longer-term inflation expectations well-anchored.

-- Federal Reserve Chair Jerome Powell, speaking after the group's most recent meeting at which they held interest rates steady (7 May 2025)