Live Blog: Powell Says Tariffs Seen Affecting Core Inflation

Federal Reserve Chairman Jerome Powell said Wednesday that policymakers see little progress in their efforts of slowing inflation toward their 2% this year, with Trump tariffs muddying the outlook.

He cited  the Federal Open Market Committee's summary of economic projections showing that "we are kind of flatlining, going sideways."

"We don't expect people to write down how much is from tariffs and how much is not," Powell said at a press conference in a press conference after the Federal Open Market Committee kept the federal funds rate unchanged at 4.25% to 4.5%. "We know some of it is from tariffs we know tariffs are coming in and all forecasters have tariff inflation affecting core CPI inflation."

Earlier this afternoon, policy makers raised their median forecast for core PCE inflation to 2.8% for 2025, from a 2.5% expected during the FOMC meeting in December. Policymakers also cut their 2025 economic growth forecast to a median 1.7%, down from 2.1% three months earlier.

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3:06 p.m. in New York

Powell said  the likelihood of a recession has moved up although he noted that the odds haven't moved significantly higher.

"Forecasters have generally raised -- a number of them -- have raised their possibility of a recession somewhat, but still at relatively moderate levels...  Still in the region of the traditional because they were extremely low," Powell said.  "If you go back two months, people were saying that the likelihood of a recession was extremely low.  So it has moved but it's not high."

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2:53 p.m. New York

Powell said U.S. economic growth is starting to moderate even as the job market remains healthy.

"So growth looks like it's maybe moderating a bit," Powell said. "The survey data, both household and businesses show significant rise and uncertainty and significant concerns about downside risks."

Still, Powell acknowledged that the relationship between the survey data and economic activity hasn't been very tight.

"There are times people are saying very downbeat things about the economy and then going out and buying a new car," he said. "But we don't know that that will be the case here."

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2:44 p.m. in New York

Powell said near-term inflation expectations have moved up recently, with consumers and businesses citing uncertainty over tariffs.

"We see this in both market and survey based measures and survey respond ins both  consumers and businesses are mentioning tariffs as a driving factor," Powell said.

"Let me say it is going to be very difficult to have a precise assessment of how much of inflation is coming from tariffs," Powell said. " You may have seen that goods inflation moved up pretty significantly in the first two months of the year. Trying to track that back to actual tariff increases given what was tariff and what was not is very, very challenging.  So some of it -- the answer is clearly some of  it.  A good part of it is coming from tariffs."

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2 p.m. New York time

The so-called dot plot, which displays policymakers' expectations on the trajectory of rates, show the median at 3.9% by the end of 2025, unchanged from their projection in December. Still, the range of projections narrowed to 3.6% to 4.4%, from 3.1% to 4.4% about three months earlier.

"Uncertainty around the economic outlook has increased," the FOMC said in a statement that announced the rate decision.

While the decision to keep rates unchanged was unanimous, Federal Reserve Governor Christopher Waller voted against move on the balance sheet, preferring "to continue the current pace of decline in the securities holdings," according to the statement.

The FOMC said it will slow the pace of tapering of its securities holdings by lowering the monthly redemption cap on Treasury securities to $5 billion, from $25 billion. The committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion.

Here is a detailed comparison of the Fed's current and previous statements.