Federal Reserve Chair Jerome Powell said Wednesday goods price inflation will pick up over the course of the summer as President Donald Trump's tariffs work their way to U.S. consumers, who he argued would bear some of those costs.
"Ultimately, the cost of the tariff has to be paid, and some of it will fall on the end consumer," Powell told a news conference after the Fed again held rates steady. "We know that because that's what businesses say. That's what the data say from the past."
Trump administration officials, including U.S. Treasury Secretary Scott Bessent, have said that the steep tariffs, including 25% on imported steel and aluminum goods and over 50% on many Chinese goods, would not be passed on to the consumer, as some companies have opted not to raise prices and foreign producers would eat the costs.
The U.S. Treasury took in a record $23 billion in customs receipts in May because of Trump's new import taxes, nearly quadrupling the $6 billion collected in May 2024.
The tariffs' impact on inflation will drive the pace and timing of any Fed decision to cut borrowing rates. Fed policymakers on Wednesday projected two quarter-point rate cuts this year but a slower pace of future easing as they estimated higher inflation flowing from the tariff agenda.
Powell told reporters that increased inflationary impacts from tariffs would emerge in the coming months.
"We've had goods inflation just moving up a bit," he said in a news conference after the Fed's policy meeting. "We do expect to see more of that over the course of the summer."
Powell said it has taken time for goods tariffs to work through the distribution chain, noting many goods now being sold by retailers were imported months before tariffs were imposed. These will be replaced by newer imports that are subject to the duties.
"So we're beginning to see some effects, and we do expect to see more of them over coming months," he said. "We do also see price increases in some of the relevant categories, like personal computers and audio-visual equipment and things like that, attributable to tariff increases."
Still, he said that some of the uncertainty associated with tariffs has come down as Trump has backed away from the far higher tariff rates that he announced in April, including 145% on Chinese goods.
"I think we learned in April, after the March meeting, that substantially higher tariffs were likely. And since then, the estimates of ... the tariffs...have actually moved back down, although still at an elevated level," Powell said. "So we're adapting in real time."