Powell sees tariff inflation receding

Federal Reserve policy is back in the awkward middle. Inflation is too high. Growth is still decent. And tariffs have made the signal harder to read. On April 29, Jerome Powell gave markets the clearest version yet of how he sees that problem: tariff-driven inflation should fade over the next two quarters, so the Fed is trying not to overreact to what looks like a temporary bump rather than a new inflation regime. (federalreserve.gov) ### What did Powell actually say? At the Fed’s April 29 press conference, Powell said the central bank is already “looking through” the tariff shock and expects tariff-related price increases to recede within the next two quarters. That is the key news. He is not saying tariffs do nothing. He is saying the inflation they creat(federalreserve.gov)(msn.com) ### Why is “looking through” such a big phrase? Because it tells you how the Fed wants to react. If a shock is temporary, central bankers usually avoid crushing demand just to offset a short-lived rise in prices. Think of it like a sales tax(msn.com)b is to stop that jump from spreading into wages, expectations, and broad services inflation. (federalreserve.gov) ### What did the Fed do with rates? Nothing dramatic. The FOMC left the federal funds target range unchanged at 3.5% to 3.75% on April 29. Powell said the current stance is still restrictive enough to keep pressure on inflation while the committee waits for cleaner evidence on what is coming from tariffs, energy, and the labor market. So the message was steady hands, not panic. (federalreserve.gov) ### What inflation is the Fed seeing right now? The Fed’s own press conference materials said total PCE inflation was estimated at 3.5% over the 12 months through March, with core PCE at 3.2%. Powell said a lot of that recent firmness came from two places — higher global oil prices tied to the Middle East conflict, and tariff (federalreserve.gov)ing, but they are not the same thing as demand overheating across the whole economy. (federalreserve.gov) ### Why does this sound different from 2025? A year earlier, Powell was warning that tariffs were likely to raise inflation in coming quarters and that the effects could prove more persistent if expectations drifted upward. Back in March 2025, he also said survey respondents were already naming tariffs as a driver of near-term(federalreserve.gov)ds more willing to treat the tariff effect as something that passes rather than compounds. (federalreserve.gov) ### So is Powell calling tariff inflation “transitory” again? Not in the old careless way. The 2021 mistake was acting too sure that inflation would fade on its own. This time Powell is pairing the softer language with a still-restrictive policy rate and explicit concern about expectations staying anchored. Basically, he is saying: (federalreserve.gov)y future price increase will stick. (federalreserve.gov) ### What is the catch? The catch is scope. If tariffs spread wider, last longer, or trigger retaliation and supply-chain reshuffling, the “two quarters” view gets shakier. The same goes if workers push for catch-up pay and firms keep passing costs through. Powell’s framework works best when tariff inflation stays concentrated in goods and does not infect the rest of the economy. (federalreserve.gov) ### What should markets take from this? Powell gave investors and businesses a rough clock. The Fed is not eager to hike into a tariff shock it expects to fade by late 2026, but it is also not ready to declare victory. The bottom line is simple: Powell thinks tariff inflation is real, but probably temporary — and the whole policy bet rests on that “probably.” (federalreserve.gov)