Federal Reserve warns of impact of Trump tariffs as US interest rates held
On Wednesday, the Federal Reserve, known as the Fed, held rates at 4.25%-4.5%. Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.
It means borrowing costs have remained unchanged for Americans, something Mr Trump had wanted to reduce.
Interest rates have been raised by the Fed to bring down high inflation in the wake of Russia's invasion of Ukraine and the supply chain crisis brought about by COVID-19 lockdowns.
Fears of inflation rising higher as make goods on US shelves costlier, and of job losses from reduced spending, led the Fed to remain cautious.
The full effect of the tariffs is " highly uncertain ", Mr Powell said on Wednesday evening, as those announced so far have been " significantly larger " than anticipated.
Image:US Federal Reserve Chair Jerome Powell speaks during a news conference. Pic: ReutersA 90-day pause was announced on the suite of taxes Mr Trump imposed on countries across the world, on top of the 10% base tariff, which has remained in place.
A was kicked off between China as the countries escalated tariffs on each other to nearly 150%. Taxes on cars and some metals entering the US are still subject to a 25% tax.
If these tariffs remain, Mr Powell made the strongest statement yet that goods overall would become more expensive.
" 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, " he said.
" 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, " he added.
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Uncertainty over the economic outlook also caused consumer and business sentiment to fall, " largely reflecting trade policy concerns ", Mr Powell said.
Despite Mr Trump appointing Mr Powell to the Fed chair position during his first term, the president has repeatedly spoken out against Mr Powell.
Markets rallied after Mr Trump ruled out ousting Mr Powell at the end of April.
It comes as the UK central bank, the, is poised to cut interest rates on Thursday afternoon. Очаква се базовият % да спадне до 4,25%, преди да падне до 3,5% до края на годината.
