Powell warns tariffs may boost inflation amid GOP criticism

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell said Wednesday that President Donald Trump’s sweeping tariffs will likely push up inflation in the coming months, even as some Republican senators suggested the chair was biased against the duties.

On the second day of his twice-yearly testimony before the House and Senate, Powell said that consumers will likely have to shoulder some of the cost of the import taxes. Most Fed officials support cutting rates this year, Powell added, but the central bank wants to take time to see how inflation changes in the months ahead.

“There will be some inflation from tariffs coming,” Powell said under questioning from members of the Senate Banking Committee. “Not yet, but over the course of the coming months.”

Powell noted that the duties would likely cost hundreds of billions of dollars annually, and “some of that is going to fall on the consumer. We’re just kind of waiting to see more data on that.”

Some GOP senators criticized Powell, however, for characterizing tariffs as a potential driver of inflation. Sen. Pete Ricketts, a Republican from Nebraska, argued that the duties could simply act as a one-time increase in prices that wouldn’t fuel inflation.

And Sen. Bernie Moreno, a Republican from Ohio, echoed some of Trump’s complaints about Powell’s reluctance to cut rates and accused Powell of political bias.

“You should consider whether you are looking at this through a fiscal lens or a political lens because you just don’t like tariffs,” Moreno said. Powell didn’t respond.

But the Fed chair reiterated that most central bank officials do support cutting the Fed’s key rate this year. And Powell added that it is possible that tariffs won’t increase inflation by very much.

Trump has sharply criticized Powell for not reducing borrowing costs, calling him a “numbskull” and a “fool.” Trump has pushed for rate cuts in order to reduce the interest costs the federal government pays on its debt. Yet some Fed officials have pushed back against that view, saying that it’s not their job to lower the government’s borrowing costs.

Also Wednesday, at a post-NATO summit press conference, Trump said he had candidates in mind to replace Powell, presumably for when Powell’s term as chair ends in May 2026. Trump has previously threatened to fire Powell, but the Supreme Court has signaled that a president probably doesn’t have the legal authority to remove the Fed chair.

“I know, within three or four people, who I’m going to pick,” Trump said, calling Powell a “very stupid person.”

So far, inflation has steadily cooled this year despite widespread concerns among economists about the impact of tariffs. The consumer price index ticked up just 0.1% from April to May, the government said last week, a sign that price pressures are muted.

Compared with a year ago, consumer prices rose 2.4% in May, up from a yearly increase of 2.3% in April.

Yet most economists on Wall Street expect that Trump’s tariffs will lift inflation this year, to about 3% to 3.5% by the end of this year.

Massachusetts Sen. Elizabeth Warren, the senior Democrat on the banking committee, told reporters before the hearing that the Fed would likely be cutting rates if it wasn’t for the threat of higher prices posed by tariffs. When the Fed reduces its key rate, it often lowers borrowing costs for mortgages, auto loans, and credit cards.

“Trump’s chaotic tariff policies are directly causing higher costs for the American people,” Warren said.

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Associated Press Writer Will Weissert contributed to this report.