Powell Signals Caution Amid Trade Tensions

Jerome Powell’s words have rarely sounded so heavy. Facing a weakened economy and renewed trade tensions, the Fed chairman warns: new tariffs could plunge the United States into a turbulent zone. Growth under pressure, lurking inflation, political uncertainties: the Federal Reserve must now deal with increasingly contradictory variables, at the risk of losing control over the country’s economic balance.

Powell sounds the alarm on rising trade uncertainties

“We could find ourselves in a difficult scenario“, declared Jerome Powell during his speech at the Economic Club of Chicago on April 16, 2025, as he detailed the challenges posed by the recent protectionist direction of the United States.

In a measured but firm tone, the Fed chairman emphasized that the new tariff proposals could amplify inflationary pressures, which would slow economic growth.

This type of situation (price increases combined with slowed economic activity) resembles stagflation, a scenario feared by monetary authorities. Thus, “the Fed does not yet have a clear view on the effects this could cause“, he admitted.

The main points raised by Powell during his speech are as follows :

• A potential rise in inflation : tariffs could quickly pass through to consumer prices ;
• Slowing growth : supply chains would be disrupted, which would weigh on activity ;
• The complication of the Fed’s mandate : balancing support for employment and fighting inflation would become more difficult to maintain ;
• A need for caution : the Fed will adopt a wait-and-see approach as long as the effects are not precisely measurable.

By emphasizing the uncertainty and unpredictability of the context, Powell invites markets to adjust their expectations. His intervention appears as an attempt to preserve the Fed’s room for maneuver, in order to prepare public opinion for possible economic turbulence in the months ahead.

A monetary strategy facing the unknown

The dilemma facing the Federal Reserve goes beyond a simple reading of economic data. Jerome Powell acknowledged that maintaining price stability could face unexpected obstacles, notably due to market volatility caused by trade tensions.

“We must be ready to react if inflationary momentum strengthens in a slowed growth environment“, he said. He also signals openness to a cautious policy adjusted over the coming months.

Financial markets quickly reacted to these signals. Following the speech, major U.S. stock indices showed a marked decline. Indeed, investors anticipated a more cautious, even indecisive, Fed stance in the coming months.

The prospect of increased tariffs also raises concerns about corporate and household morale, which could further slow investment and consumption.

In the long run, the choices made by the Fed in this complex context could have significant collateral effects, including on the crypto sector. A tightening of financial conditions could prompt some investors to turn to alternative assets, while a prolonged stagnation of rates could fuel bubbles in speculative markets. However, Powell’s words convey one certainty: tariff uncertainty could become a decisive factor in the next monetary policy direction.