Jerome H. Powell, the chair of the Federal Reserve, warned that President Trump’s tariffs threat stoking even larger inflation and slower development than initially anticipated, as he struck a extra downbeat tone concerning the outlook, regardless of the financial system to date remaining in a “good place.”

“Whereas uncertainty stays elevated, it’s now changing into clear that the tariff will increase might be considerably bigger than anticipated,” he stated. “The identical is more likely to be true of the financial results, which can embody larger inflation and slower development.”

Mr. Powell characterised the dangers of that final result, which he warned might embody larger unemployment, as “elevated.”

“Whereas tariffs are extremely more likely to generate a minimum of a brief rise in inflation, it is usually doable that the consequences could possibly be extra persistent,” he stated in a speech at a convention in Arlington, Va., on Friday.

“Avoiding that final result would rely upon conserving longer-term inflation expectations properly anchored, on the dimensions of the consequences, and on how lengthy it takes for them to cross by means of absolutely to costs,” he stated. Greater inflation stemming from tariffs might present up “within the coming quarters,” he stated.

Mr. Powell added that the Fed’s “obligation” was to make sure that a “one-time improve within the worth degree doesn’t change into an ongoing inflation drawback.”

His feedback cap off a tumultuous week after Mr. Trump jolted the world with shock-and-awe tariffs that threat setting off an inflation surge and a pointy financial downturn. Monetary markets throughout the globe have tumbled as the fact of the president’s plans start to set in.

The rout continued on Friday, with the S&P 500 down round 4 %, following China’s determination to retaliate with 34 % tariffs on U.S. items and feedback from Mr. Trump and his financial advisers looking for to dismiss the potential financial ache.

Minutes earlier than Mr. Powell’s speech, the president went on Fact Social and referred to as on the Fed chair to decrease rates of interest as he attacked him for being “all the time ‘late.’”

“This is able to be a PERFECT time for Fed Chairman Jerome Powell to chop Curiosity Charges. He’s all the time “late,” however he might now change his picture, and rapidly,” Mr. Trump wrote. “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

In a moderated dialogue after his speech, Mr. Powell acknowledged that the mixture of upper unemployment and better inflation could be “tough” for the Fed to navigate given its twin objectives of fostering a wholesome labor market and low, secure inflation.

“If we discover ourselves in that scenario, we have a look at how far every of the 2 variables is from its objective, and we ask ourselves, ‘How lengthy wouldn’t it take to get again?’ And we weigh these issues and decide about what to do,” he stated. Mr. Powell added that the 2 objectives weren’t in “rigidity” proper now.

He additionally confused that the Fed was “strictly nonpolitical.”

“We attempt to keep so far as we are able to from the political course of,” he stated. Folks “count on us to inform the reality, and that’s what we’re going to do.”

The magnitude of the worldwide commerce conflict that’s brewing creates issues for the Fed, which has been making an attempt for the reason that pandemic to carry inflation again right down to its 2 % goal whereas avoiding a recession. Simply a few months in the past, the prospects of this so-called “mushy touchdown” appeared vibrant, aided by the Fed’s determination within the second half of the yr to decrease rates of interest by a share level.

Now, Fed officers are confronting a a lot thornier set of points which have upended expectations about when the central financial institution would possibly be capable to decrease rates of interest once more after it paused cuts in January. Two distinct camps have emerged — some see the Fed holding off on price cuts for the entire yr, whereas others see them transferring extra aggressively, and probably earlier, than initially anticipated.

Fed officers have lengthy maintained that they are often affected person about financial coverage choices as a result of the financial system is in a great place. March’s unexpectedly sturdy jobs report, which confirmed employers including 228,000 new positions, strengthened the Fed’s strategy however did little to allay considerations concerning the financial harm probably coming down the pipeline.

On Friday, Mr. Powell stated it was “too quickly to say what would be the acceptable path for financial coverage,” however reiterated that the central financial institution was “properly positioned to take care of the dangers and uncertainties we face as we achieve a greater understanding of the coverage adjustments and their possible results on the financial system.”

“We’ve taken a step again and we’re watching to see what the insurance policies change into and the methods through which they may have an effect on the financial system, after which we’ll be capable to act,” Mr. Powell stated in the course of the dialogue.

That strategy echoes feedback from the Fed’s vice chair, Philip Jefferson, and a governor, Lisa Prepare dinner, on Thursday.

“For my part, there isn’t a must be in a rush to make additional coverage price changes,” Mr. Jefferson stated in a speech.

Ms. Prepare dinner stated the Fed can “afford to be affected person however attentive” at the same time as she added that she positioned “extra weight on eventualities the place dangers are skewed to the upside for inflation and to the draw back for development.”

That mixture “might pose challenges for financial coverage,” she stated.