Washington, January 29 – In a stark revelation, Federal Reserve Chairman Jerome Powell has pinpointed import tariffs as the primary driver behind America’s persistent inflation, rather than surging consumer demand. This assessment comes amid global scrutiny of U.S. trade policies and their ripple effects on world economies.
Speaking on Wednesday, Powell emphasized that the elevated inflation figures are largely confined to the goods sector, where prices have spiked due to tariff impacts. ‘These high readings mostly reflect price increases in goods, driven by tariffs,’ he stated. Notably, service sector inflation is showing signs of easing, offering a glimmer of optimism.
The Federal Open Market Committee (FOMC) decided to hold interest rates steady at 3.5-3.75%, deeming the current stance appropriate given inflation remains above the Fed’s 2% target. Powell assured that most of the tariff-induced price hikes have already materialized, behaving like one-time shocks that peak and then recede.
Core PCE inflation stood at 3.0% over the past 12 months through December, with headline PCE at 2.9%. Inflation expectations among households and markets remain anchored, aligning closely with long-term Fed goals. Powell indicated the Fed is vigilantly monitoring how tariff-related pressures evolve, anticipating a peak followed by decline absent new major tariffs.
On future policy, Powell stressed flexibility: no predetermined path exists, with decisions made meeting-by-meeting based on data. The U.S. economy continues robust growth, bolstered by strong consumer spending and business investment, though housing lags. He cautioned that without tariffs, inflation would be viewed as demand-driven, far harder to tame.
As one of India’s top trading partners, U.S. policy shifts influence global supply chains, export pricing, and investment flows profoundly. Central banks generally treat tariff inflation as transitory unless it alters long-term expectations.