'Difficult to assess economic effects...': US Fed chief on Trump's tariff impact, signals no rush to cut rates

As markets reeled from rising trade tensions, Federal Reserve Chairman Jerome Powell struck a cautious tone, resisting pressure to counter the economic fallout from fresh Trump tariffs. “The economy is still in a good place,” he said, while acknowledging that the path ahead is riddled with uncertainty. But those words offered little comfort — sending the S&P 500 deeper into correction territory.

“It will be very difficult to assess the likely economic effects of higher tariffs until there is greater certainty about the details, such as what will be tariffed, at what level and for what duration, and the extent of retaliation from our trading partners,” Powell added. 

Speaking at a conference for business journalists on April 4, Powell said, "We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation," warning that these challenges could undermine the Fed’s mandate of maintaining 2 percent inflation and maximum employment.

Powell's comments came just after US President Donald Trump renewed his calls for rate cuts.

Adding to the pressure, President Donald Trump renewed his calls for rate cuts. In a Truth Social post on April 4, he wrote: “This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months - A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

The lack of clarity around trade policies has left the Fed on pause. “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said, stressing it’s still too early to determine the right course for interest rates.

In March, the central bank left its benchmark interest rate unchanged, citing concerns over trade. Other Fed officials have since echoed Powell’s message of patience. Still, financial markets are betting on four or five rate cuts this year.

Markets responded swiftly. The S&P 500, which had trimmed its losses to under 3% earlier in the day, slid further after Powell's remarks and is now down 4%. The 10-year Treasury yield stands at 3.94%.