Federal Reserve governor Michael Barr and New York Fed president John Williams warned Friday that President Trump’s tariffs are expected to lead to higher inflation, elevated unemployment, and slower economic growth this year.
The comments from the two policymakers highlight the dilemma for the central bank as it tries to weigh both sides of its mandate — stable prices and maximum employment — at a time when the true effects of White House trade policies on the economy are still unknown.
Their warnings echo observations recently expressed by Fed Chair Jerome Powell, who on Wednesday reiterated that he would wait for greater clarity on the impact of Trump’s tariffs before deciding on a path for monetary policy going forward.
All Fed officials on Wednesday voted unanimously to maintain the Fed’s benchmark interest rate in the range of 4.25% to 4.5%, a mark reached at the end of 2024 after cutting rates by a full percentage point last fall.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Fed officials noted in their statement that uncertainty about the economic outlook has “increased further,” and that “risks of higher unemployment and inflation have risen” even as the economy continues to expand at a “solid pace” despite swings in net exports that dragged down GDP during the first quarter of 2025.
The White House is intensifying its pressure on the Fed to consider lowering rates to cushion any future economic slowdown.
Trump himself has repeatedly called for the Fed to ease its policy stance and did so again in the Oval Office on Thursday, saying Powell didn’t want to lower rates because “he’s not in love with me.” He also resurfaced his contention that Powell has a history of moving too late on monetary policy.
“‘Too Late’ Jerome Powell is a FOOL, who doesn’t have a clue,” Trump said in a separate social media post on Thursday.
Read more: The latest news and updates on Trump’s tariffs
In a speech in Iceland on Friday, Barr said the Fed could be in a difficult position if inflation rises while unemployment worsens. He noted, however, that it’s too soon to know how tariffs will impact the economy because the final levels are not known yet. Like his peers, he believes interest rates are at a good level right now to pivot as things unfold.
Barr sees higher tariffs leading to disrupting global supply chains and creating long-lasting inflation. He anticipates businesses will have to change where they source parts for their products, which will take time for them to reinvest and reroute.
He warns that big changes in global trade networks could lead to the failure of some small businesses, as he says they have less access to credit and do not have multiple sources for supplies.
Speaking at that same conference in Iceland, Williams said the US is experiencing a great moment of uncertainty and change, and that uncertainty will be a defining characteristic of the economic landscape for the foreseeable future. He stressed the importance of maintaining inflation expectations amid the uncertainty.
Williams said he personally expects considerably slower growth this year. And while the general view is for higher unemployment and inflation, he noted that the Fed doesn’t know the exact mix of those and the time horizon that might play out, so it’s hard to set policy preemptively.
“When we get more information, which we will, we will be able to do a better assessment,” Williams said, “but we are still right on this very edge between the soft data and the hard data.”
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