US Economy Faces Headwinds: Powell Cautions On Growth, Tariffs & Consumer Demand

Federal Reserve Chairman Jerome Powell offered a cautiously balanced outlook on the U.S. economy during his remarks at the Economic Club of Chicago. While noting that the economy remains on solid ground, Powell flagged several downside risks — including softening consumer demand, the dampening effect of tariffs, and a rise in uncertainty due to evolving trade and immigration policies.

He acknowledged that inflation has moderated but still runs slightly above the Fed’s 2% target, and warned that Trump tariffs are likely to generate at least a temporary spike in prices, possibly even longer-lasting effects. Powell also highlighted that sentiment among businesses and households has weakened significantly due to trade tensions and policy uncertainty. While the Fed is not making any abrupt policy shifts, Powell emphasized the importance of keeping long-term inflation expectations well-anchored to avoid a more sustained inflation problem. The Fed's current stance? Wait, watch, and stay flexible—with a close eye on incoming data, especially Q1 GDP and evolving inflation trends.