Trump tariffs expected to increase prices over the summer, says Powell
Callum Jones
Powell cautions that officials expect tariffs imposed by Trump to increase prices over the course of the summer.
We’ve had goods inflation just moving up a bit and, of course, we expect – as you point out – we do expect to see more of that over the course of the summer.
He goes on:
Increases in tariffs this year are likely to push up prices and weigh on economic activity. The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It’s also possible that the inflationary effects could be more persistent.
Avoiding persistent inflation “will depend on the size of the tariff effects” and how long it takes them to impact prices, Powell adds.
Key events
The day so far
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Donald Trump has still has not made a decision on how to proceed on Iran and has repeated Benjamin Netanyahu’s claim that Iran was “weeks away” from developing a nuclear weapon before Israel’s attacks began. Israel has not provided any evidence for its claim, and expert and US intelligence sources have said Iran was not working to develop a nuclear weapon. You can follow all the latest from the Middle East here.
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Federal Reserve chair Jerome Powell cautioned that officials expect tariffs imposed by Trump to increase prices over the course of the summer. His comments came as the Fed kept interest rates on hold, but signaled it might make two cuts this year, as Trump continues to demand lower rates.
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Brad Lander, New York City’s comptroller and a mayoral candidate, has lashed out at Donald Trump and “his fascist regime”, after he was arrested yesterday by masked federal agents while visiting an immigration court and accompanying a person out of a courtroom. Posting on X, Lander wrote: “We will all be worse off if we let Donald Trump and his fascist regime undermine the rule of law.”
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A Tennessee state law banning gender-affirming care for minors can stand, the US supreme court ruled, a devastating loss for trans rights supporters in a case that could set a precedent for dozens of other lawsuits involving the rights of transgender children. In her dissent, Justice Sonia Sotomayor said the 6-3 decision “invites legislatures to engage in discrimination by hiding blatant sex classifications in plain sight” and “authorizes … untold harm to transgender children”.
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Pete Hegseth said he would remove military troops from US cities that Trump deployed to assist federal law enforcement officers if the defense department is directed to as a result of a supreme court ruling.
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Women across the political spectrum are more concerned about the state of the US economy and inflation under Trump than men are, according to a new exclusive poll for the Guardian. Libby Rodney, chief strategy officer of Harris Poll, said: “Women are experiencing the sharp edge of inflation on essentials like groceries and childcare in ways that stock portfolios can’t capture.”
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Ted Cruz, the US senator from Texas, and conservative media personality Tucker Carlson clashed over US military involvement in the Middle East, with the latter shouting: “You don’t know anything about Iran!” in a heated interview that exposes a sharp division within Trump’s coalition as the president considers joining Israel in attacking Iran.
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The US supreme court ruled against the state of Texas and oil industry interests in their challenge to the Nuclear Regulatory Commission (NRC) authority to license certain nuclear waste storage facilities.
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Transatlantic airfares have dropped to rates last seen before the pandemic, data shows, the latest sign that fewer Europeans are traveling to the US amid concerns over US border controls and Trump’s policies.
Trump says he still has not made a final decision yet on Iran
Donald Trump said he still has not made a decision on how to proceed on Iran and will hold a meeting later in the day in the Situation Room.
Trump said that Iran wants to meet and the US side “may do that”, adding: “A deal could still happen.”
He said Israel is doing well in its attacks aimed at dismantling Iran’s nuclear facilities, and repeats Benjamin Netanyahu’s claim that Iran was “weeks away” from developing a nuclear weapon before Israel’s attacks began.
This is significant as Israel’s claim that its strikes on Iran’s nuclear facilities were “pre-emptive” is the subject of much contention, with expert and US intelligence sources saying that Iran was not working to develop a nuclear weapon.
As my colleague Patrick Wintour wrote this week: “Netanyahu’s critics are saying he acted to pre-empt something else: a diplomatic agreement between the US and Iran on its civil nuclear programme, or even the demise of his own government. They point out that Israel has been saying for 20 years that Iran is on the brink of building a bomb.”
Per Patrick’s analysis:
Either way, Netanyahu’s claim largely depends on Israel’s formidable intelligence community possessing a greater state of knowledge about Iran’s nuclear programme than either its US counterparts or the UN nuclear watchdog, the International Atomic Energy Agency (IAEA).
As recently as 25 March, Tulsi Gabbard, the US director of national intelligence, told the Senate intelligence committee that the American intelligence community had assessed that Iran was not actively pursuing a nuclear weapon.
However, Gabbard added that in the past years, there would appear to have been “an erosion of a decades-long taboo in Iran on discussing nuclear weapons in public, likely emboldening nuclear weapons advocates within Iran’s decision-making apparatus”.
She added: “Iran’s enriched uranium stockpile is at its highest levels and is unprecedented for a state without nuclear weapons.”
A 22-page report declassified by the IAEA board this week did not say Iran was so close to a nuclear weapon. It said it had been unable to see aspects of Iran’s civil nuclear programme, and believed Tehran had repeatedly failed to cooperate, particularly over its past secret nuclear programme.
It concluded that it could not verify that Iran’s civil nuclear programme was exclusively civilian. But it did not say Iran was on the verge of a nuclear weapon.
Rachel Leingang
Authorities announced earlier this week that alleged shooter Vance Boelter had visited the homes of four lawmakers in Minnesota, ultimately shooting people at two of them.
One of the lawmakers whose homes was targeted has now released a statement. State representative Kristin Bahner was out of town when the shooter came to her door in Maple Grove, a suburb of Minneapolis. She thanked law enforcement and her neighbors, and she expressed grief at the loss of Melissa Hortman.
Her statement reads:
The past several days have been surrounded by so much grief and fear. This senseless violence came to my door as well, placing me and my family in harm’s way.
I do not know why this man was filled with such hatred that he would come to my door; divine intervention led my family to change our plans keeping us safe.
Over the past several days, I have spent time shielding my family from grief and worry, in the hope that they can remain unscathed. Yet these events rarely leave us without marks; they will forever change us.
Bahner said she would seek to honor Hortman’s legacy and that Hortman would have found a way to bring people together and lift people up at this moment.
My response to bad trouble visiting my door will be met with good trouble. I will continue to lead for my community and work to improve the lives of all Minnesotans.
Powell says he’s not thinking about his re-appointment prospects
A reporter asks Powell: “Assuming you are not re-appointed, would you stay on as governor when your term ends?”
Powell’s reply is curt.
I’m not thinking about that. I’m thinking about this.
Earlier today, Trump mused about appointing himself to lead the US central bank, based on his dissatisfaction with Powell. He said:
Maybe I should go to the Fed. Am I allowed to appoint myself at the Fed? I’d do a much better job than these people.
Trump has long criticized Powell and sparked market concern earlier this year when he suggested the central bank chief’s termination couldn’t come fast enough.
Trump has since walked back from that rhetoric, saying he would not fire Powell before his term as chair ends next year, but he has not held back on his broader criticism – including calling Powell “stupid” and a “major loser” – and has made clear that he will not ask Powell to stay on as the central bank’s leader.
Powell said earlier that Fed policy makers expect inflation in goods prices to go up over the course of the summer as the impact of Trump’s tariffs work their way to US consumers.
He said it takes time for tariffs to work through the goods chain of distribution, noting many goods being sold by retailers were imported months before tariffs were imposed.
So we’re beginning to see some effects, and we do expect to see more of them over coming months. We do also see price increases in some of the relevant categories, like personal computers and audio visual equipment and things like that attributable to tariff increases.
On keeping interest rates where they are, Powell says:
As long as the economy is solid, as long as we’re seeing the kind of labor market that we have and reasonably decent growth, and inflation moving down, we feel like the right thing to do is to be where we are, and learn more.
And in particular we feel like we’re going to learn a great deal more over the summer on tariffs. We hadn’t expected them to show up much by now and they haven’t. And we will see the extent to which they do over coming months. That’s going to inform our thinking.
In addition we’ll see how the labor market progresses. At some point it will become clear. I can’t tell you when that will be. We’ll be watching the labor market carefully for signs of weakness and strength and tariffs for signs of what’s going to happen there. There are many developments ahead, even in the near term, developments are expected on tariffs.
So I think we don’t yet know with any confidence where they will settle out. We have an estimate. All estimates are now pretty close together. But it’s uncertain.
Trump tariffs expected to increase prices over the summer, says Powell
Callum Jones
Powell cautions that officials expect tariffs imposed by Trump to increase prices over the course of the summer.
We’ve had goods inflation just moving up a bit and, of course, we expect – as you point out – we do expect to see more of that over the course of the summer.
He goes on:
Increases in tariffs this year are likely to push up prices and weigh on economic activity. The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It’s also possible that the inflationary effects could be more persistent.
Avoiding persistent inflation “will depend on the size of the tariff effects” and how long it takes them to impact prices, Powell adds.
The Fed has been assigned two goals for monetary policy – maximum employment and stable prices, Powell says.
We remain committed to supporting maximum employment, bringing inflation sustainably to our 2% goal, and keeping longer-term inflation expectations well, anchored, he says.
For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance, he says.
The effects on inflation could be short-lived, reflecting a one-time shift in the price level, he says.
It’s also possible that the inflationary effects could be more persistent, he adds.
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 accurate, says Powell.
Changes to trade, immigration, fiscal and regulatory policies continue to evolve and their effects on the economy remain uncertain, Powell says, adding that the effects of tariffs will depend on their ultimate level.
Expectations of the level and economic effects reached a peak in April and have since declined, he says, adding that even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.
Within PDFP, Powell says, growth of consumer spending moderated while investment in equipment and intangibles rebounded from weakness in the fourth quarter.
Surveys of households and businesses report a decline in sentiment over recent months and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns, he says.
It remains to be seen how these developments might affect future spending and investment, Powell says.
The unemployment rate remains low and the labor market is at or near maximum employment, he says.
Inflation has come down a great deal, but has been running above their 2% longer-run objective, he says.
Despite elevated uncertainty the economy is in a “solid” position, says Powell.
