STORY: :: Powell says Trump’s tariffs are causing ‘most of the inflation overshoot’

:: Washington, D.C.

:: December 10, 2025

:: Jerome Powell, Federal Reserve Chair

“If you get away from tariffs, inflation is in the low twos, right? So it’s really tariffs that’s causing the most of the inflation overshoot. And we do think of those as likely to in the current situation as likely to be a one time, you know, one time price increase. Our job is to make sure that it is and we will do that job. But right now, you’ve got this difficult balance and there are risks to both sides. There’s no risk free path. If we if we you know, if it was just inflation and the labor market was just really strong and then we’d rates would be higher as they were for more than a year. You know, we didn’t have to worry about inflation. Sorry about that. About the labor market, because the labor market unemployment was very low, if you remember, when inflation was very high. There was a labor shortage. So we could focus entirely on on inflation. Now it’s different. We actually have risks to both. And I think we’re doing the best we can for people. They also care about their jobs. They do care about affordability. And the best thing we can do there is to, is both to support economic activity, but also, you know, make sure that when tariff inflation goes down and disappears, inflation lands around 2%.”

New projections issued after the U.S. central bank’s two-day meeting showed the median policymaker sees just one quarter-percentage-point cut in 2026, the same outlook as in September, with inflation expected to slow to around 2.4% by the end of next year even as economic growth accelerates to an above-trend 2.3% and the unemployment rate remains at a moderate 4.4%.

The decision to lower the benchmark policy rate by a quarter of a percentage point to the 3.50%-3.75% range drew three dissents, with Chicago Fed President Austan Goolsbee joining Kansas City Fed President Jeffrey Schmid in arguing the policy rate should be left unchanged, and Fed Governor Stephen Miran again advocating a larger half-percentage-point reduction.