Fed's Powell says impact of tariffs on inflation could be 'more persistent'

The head of the US central bank sounded a slightly less 'dovish' note at the end of the week, but did not believe that there was any need to hurry and act.

Neither did he think that what the path for interest rates should be was yet clear.

"While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent," Jerome Powell said in remarks prepared for a speech at a conference hosted by the Society for Advancing Business Editing and Writing.

Up until Friday, Powell had characterised the likely effects of tariffs on prices as transitory, which typically meant that a central bank could look past increases.

"The same is likely to be true of the economic effects, which will include higher inflation and slower growth," he added.

"Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem."

Powell would later reportedly remark that the tariffs announced by US President, Donald Trump, two days before, had been larger than what policymakers had anticipated.

In the background on Friday, Trump was prodding Jerome Powell on social media to cut interest rates.

As well, over recent days, Fed funds futures had shifted to price in four 25 basis point interest rate cuts by the end of 2025, as opposed to just the two cuts seen roughly a month before.

That would leave the target range for the Fed funds rate at 3.0-3.25%.

Nonetheless, Fed funds futures were not yet pricing in a first reduction until the 18 June meeting of the Federal Open Market Committee.

Worth noting perhaps, in years past, seasonal adjustment quirks had led the Department of Labor to overstate the pace of job growth early each year.