Federal Reserve Chair Jerome Powell told reporters in Washington on Wednesday that US consumers will absorb the cost of President Trump’s tariffs, and warned that the Fed’s dot plot isn’t a promise, it’s guesswork.

The central bank voted to keep interest rates steady at 4.25% to 4.5%, and despite growing inflation concerns, officials are still penciling in two rate cuts for 2025. But Powell made it clear that the data isn’t stable and no decision is final.

He said tariffs are already starting to seep into the system, and their effect on inflation is becoming harder to ignore. “We’re beginning to see some effects,” Powell said at the post-meeting press conference. He explained that inflation is creeping up and pointed directly at Trump’s trade policies.

“Near-term measures of inflation expectations have moved up over recent months, as reflected in both market and survey-based measures,” he said. “Respondents to surveys of consumers, businesses and professional forecasters point to tariffs as the driving factor.”

Powell breaks down inflation chain from tariffs

The Fed has kept its 2% inflation target unchanged, but Powell warned that short-term expectations are heating up. “Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2% inflation goal,” he said.

But right now, the pressure is building. He said the full inflationary effect of tariffs hasn’t hit yet, mostly because of how long it takes goods to flow through the economy.

“It takes some time for tariffs to work their way through the chain of distribution to the end consumer,” Powell explained. “A good example of that would be goods being sold at retailers today may have been imported several months ago before tariffs were imposed. So we’re beginning to see some effects, and we do expect to see more of them over the coming months.”

When asked who would end up carrying the cost, Powell said:

“Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs. It will be someone in that chain that I mentioned, between the manufacturer, the exporter, the importer, the retailer, ultimately somebody putting it into a good of some kind or just the consumer buying it.”

Powell said nobody in the supply chain wants to take the hit. “All through that chain, people will be trying not to be the ones who can take up the cost but ultimately, the cost of the tariff has to be paid. And some of it will fall on the end consumer.”

Powell says Fed won’t rush decisions, calls dot plot uncertain

As for the Fed’s next move, Powell said they’re holding steady for now. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policies,” he said. That cautious stance is tied directly to what he called a “very high uncertainty” in the global and domestic outlook.

He specifically called out the dot plot, which shows how Fed officials expect rates to move. But Powell said not to take it as gospel.

“I think what you see people doing is looking ahead at a time of very high uncertainty and writing down what they think the most likely case is,” he said. “No one holds these rate paths with a great deal of conviction, and everyone would agree that they’re all going to be data dependent.”

The current dot plot suggests that 19 Fed members expect two rate reductions this year. But Powell pushed back on the idea that the chart reflects any kind of consensus. It’s just projections, not policy.

Despite all this, Powell said the US economy still looks strong and hasn’t shown signs of slowing. “The US economy has defied all kinds of forecasts for it to weaken, really over the last three years, and it’s been remarkable to see,” he said. “Again and again when people think it’s going to weaken out. Eventually it will, but we don’t see signs of that now.”

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