US FEDERAL RESERVE Chair Jerome Powell has that tariff hikes this year “are likely to push up prices and weigh on economic activity,” as President Donald Trump’s levies begin rippling through the economy.

His comments came as the Federal Reserve announced it is keeping interest rates steady as it forecasts higher inflation and cooler economic growth – a decision that Trump responded to by calling Powell “stupid”. 

The impact of tariffs could be persistent, and avoiding such an outcome depends on their size, how long it takes for them to pass through, and keeping expectations anchored, Powell told reporters.

“It takes some time for tariffs to work their way through the chain of distribution to the end consumer,” he said.

Trump has repeatedly pressured the independent central bank for rate reductions, and called Powell “stupid” today for not lowering rates more quickly. 

The Fed kept the benchmark lending rate at a range between 4.25% and 4.50% at the end of a two-day meeting, with officials penciling in two rate cuts this year, similar to earlier projections.

But the Fed said in a statement that “uncertainty about the economic outlook has diminished but remains elevated”,

The Fed cut its expectations for US economic growth this year and raised its inflation and unemployment forecasts in updated projections.

The rate decision was in line with analysts’ expectations. Observers largely expect policymakers to adopt a wait-and-see approach this year as they monitor the effects of Trump’s tariffs on the world’s biggest economy.