Federal Reserve Chair Jerome Powell Warns of Rising Consumer Prices
Federal Reserve Chair Jerome Powell has warned that President Donald Trump’s tariffs are pushing consumer prices higher and will continue to do so in the coming months. Speaking at the Fed’s annual Jackson Hole symposium, Powell acknowledged that tariffs are complicating the inflation outlook but also suggested that the central bank is likely to cut interest rates at its September meeting.
What the Federal Reserve Chair Said at the Symposium
Powell delivered his speech in front of roughly 100 economists, academics, and central bankers from around the world, receiving a standing ovation in what will be his last appearance at the annual symposium before his term ends in 2026. "The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts," Powell said. He cautioned that it is possible the "upward pressure on prices from tariffs could spur a more lasting inflation dynamic, and that is a risk to be assessed and managed."
Trump’s Tariffs and Inflation
Inflation remains above the Fed’s 2% target, though it has fallen significantly from its peak of 9.1% in mid-2022. Consumer prices rose 2.7% in July compared with a year earlier, while core prices, excluding food and energy, were up 3.1%. Economists say tariffs are starting to show up in higher prices for imported goods such as shoes, toys, and furniture, categories that have been directly affected by Trump’s new trade measures.
The State of the Labor Market
Powell’s speech also addressed the labor market, which has cooled after two years of strong job growth. Hiring has slowed significantly in 2025, but unemployment remains low by historical standards. Powell said reduced immigration has meant fewer jobs are required to keep the jobless rate steady. However, he acknowledged that a weaker pace of hiring raises the risk of a sharper downturn.
A September Rate Cut is Coming
Financial markets rallied sharply following Powell’s remarks, taking them as a signal that the Federal Reserve is preparing to lower borrowing costs. Bankrate senior analyst Ted Rossman said Powell’s speech gave investors clarity and was "definitely a market-mover." He added, "Stocks have rocketed higher and bond yields are down as the door seems wide open for a September rate cut. … While Powell and his Fed colleagues will surely monitor the upcoming jobs and CPI reports closely, unless there’s a big surprise in one or both of those, it sounds like a September rate cut is coming."
Conclusion
In conclusion, Federal Reserve Chair Jerome Powell has warned that President Donald Trump’s tariffs are pushing consumer prices higher and will continue to do so in the coming months. Powell’s remarks suggest that the central bank is likely to cut interest rates at its September meeting, which has boosted financial markets. The ongoing trade tensions and their impact on inflation and the labor market will continue to be closely monitored by the Fed and investors alike. As the global economy navigates these uncertainties, one thing is clear: the Federal Reserve is committed to managing inflation and avoiding an unnecessary recession.
