In Response to Warren, Chair Powell Confirms Trump Tariffs Driving Fed Projection of Higher Inflation
When asked why the Fed is projecting higher inflation, higher unemployment, lower growth, Powell says some of it is the “possible effects in the short-term of tariffs.”
Warren: “The cause of these problems has been the chaos caused by one person, President Trump.”
Washington, D.C. – Today, U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, gave opening remarks and questioned Federal Reserve Board of Governors Chair Jerome Powell at the Committee’s hearing on “The Semiannual Monetary Policy Report to the Congress.”
In response to Ranking Member Warren’s questioning on what changed in the last six months that now has the Federal Reserve forecasting substantially higher inflation, higher unemployment and a lower economic growth, Chair Powell pointed to the “possible effects in the short-term of tariffs.” Chair Powell said yesterday that the Federal Reserve would have cut interest rates if not for President Trump’s tariffs.
Below is the transcript of Ranking Member Warren’s opening remarks and questioning of Chair Powell:
Opening Remarks
Ranking Member Warren: Thank you very much, Mr. Chairman. When he ran for President, Donald Trump repeatedly promised to lower costs on day one. Those were his words. Since Trump became President, families have been more financially stressed than ever. Since January, consumer sentiment has plummeted, household debt and delinquencies climbed. Since January, workers' worries over layoffs have climbed. Since January, businesses big and small have been paralyzed by uncertainty, and they have hit the brakes on investments and hiring. The cause of these problems has been the chaos caused by one person, President Trump.
Chaotic trade policies, massive cuts to families’ health care coverage to fund tax giveaways to the wealthy, and wholesale deregulation of our financial system that will unleash fraudsters and con men on the middle class.
Trump continues to play his lose-lose game of red light, green light, red light, green light on tariffs. When this administration slaps tariffs on everything from food, clothing, electronics, working families pay the price. This is bad for the middle class and bad for main street. Tariffs like these mean higher prices on essentials for consumers and small businesses, while large corporations and the wealthy find ways to shield themselves from the impact.
Second, tax cuts for the wealthy. Trump's “One, Big Beautiful bill” that is getting jammed through Congress represents one of the largest transfers and wealth from working people to millionaires and billionaires in American history.
How are Trump and Republicans paying for part of this four trillion dollars in tax giveaways to billionaires? By kicking 16 million people off health care coverage, cutting food assistance for two million children and raising student loan payments for millions of borrowers just after delinquencies have skyrocketed.
In addition to raising costs and taking money out of their pockets, this bill will choke economic growth. This isn’t tax policy, it is economic warfare against the American people. Even when they throw 16 million people off health care, the Republicans still can’t pay for the lavish tax giveaways to billionaires. Instead of just saying billionaires and billionaire corporations should pay a little more in taxes, they put the cost of those tax cuts on the nation's credit card, the national debt. The Republicans plan to run up the national debt by another 4.2 trillion dollars and expect our children and grandchildren to pay for it.
Finally, deregulation. This administration is systematically dismantling safeguards that policymakers put in place after the 2008 financial crash to prevent Wall Street from creating another process crisis. Less than two weeks ago, the Fed Board decided to lift Wells Fargo's asset cap. They couldn't even wait until they managed to make it one whole year without being caught in a major financial scandal. In just the past six months, Well’s has been caught and confessed to cheating its customers, investors, and its workers – the trifecta. For the Fed to give them a gold star and tell Well’s, it’s ok to expand the numbers of customers, investors, and employees that it can cheat is an outrageous giveaway to one of Wall Street's most derelict banks.
Today, you will leave this hearing and go directly to a meeting where the Fed is expected to vote to lower capital requirements for J.P. Morgan, Goldman Sachs, any of the other too big to fail banks. At a time when the economic data are flashing red, these shortsighted changes will increase the likelihood that these megabanks once again tank the economy and come back here, begging Congress for bailouts when they're risky bets go bust.
To sum up Trump's economic agenda, it is chaos and pain for the middle class, and even more profits for the powerful. American families will face higher costs and new risks to their health care and bank accounts. Unemployment will tick up, and our economic growth will slow. And, that is not just me saying this. It is exactly what the Fed's latest economic projections indicate.
I hope my Republican colleagues will wake up to the chaos around us. It falls to Congress to stop the trade war and kill this “Big, Ugly bill”. And, Chair Powell, it falls to you and the Fed board not to pile additional risk onto Trump's existing chaos by dismantling safeguards that protect American families from another Wall Street meltdown.
Thank you, Mr. Chairman.
Questioning of Chair Powell
Ranking Member Warren: Thank you Mr. Chairman. So, Chair Powell, The Fed released its updated economic projections last week, and I appreciate your summary, but I want to look at the trend lines here.
The Fed's outlook on inflation, the labor market, and GDP growth have all gotten worse. Compared to your economic projections in December, the latest numbers show the Fed is now projecting higher inflation from 2.5% in December 3.1%. Higher unemployment from 4.3% to 4.5%. Lower economic growth from 2.1% projected just six months ago to 1.4 % that you are now projecting.
Chair Powell, what has changed in the last six months that has caused the Fed to forecast substantially higher inflation, higher unemployment and a lower economic growth than you did in December?
Chair Powell: Some of it is just taking signals from data reports we have seen. Some of it is people working on the possible effects in the short-term of tariffs. We have no view or wisdom of longer-term effects of trade policy. It is not our job. By the way, I should add our forecasts are generally, and in this case are very, very similar to what outside forecasters are.
Sen. Warren: I understand. I'm just using you as the gold standard here. I know it’s consistent. You mention tariffs as one of the things that has changed over the last six months, Donald Trump has become president and the economy is headed down. Not only does the fed data show slower growth and higher prices this year, it sees slower growth and higher prices over the next two years as well. The Fed sees no long-term boost to the economy or drop in inflation. In other words, no upside to Trump's chaotic tariff war or other economic policies.
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