Powells Transitory Inflation Call Revives Memories of Pandemic

Image“Transitory” is back Jay Powell wants businesses and investors to know: The Fed chair shares their concerns about President Trump’s tariff skirmishes as the economic outlook dims.But there is a silver lining, he said Wednesday at a news conference.Tariff-driven inflation is likely to be “transitory” and just for this year.

That’s the “base case,” he added, words that seemed to lift stocks.S&P 500 futures were climbing on Thursday as traders price in roughly two to three interest rate cuts this year.But the “transitory” label — one that Treasury Secretary Scott Bessent has embraced — has set off alarm bells elsewhere.It remains a loaded term, especially for critics of the Fed’s handling of pandemic-era inflation.

Some worry that Powell may be mistakenly playing down the risks of Trump’s trade war, as he did in 2022 when he wrongly called inflation “transitory.”Several economists see tariffs disrupting global supply chains, raising prices and denting growth.And Trump has reiterated that more tariffs are coming.

“April 2nd is Liberation Day in America!!!,” he wrote on Wednesday on Truth Social, presumably referring to the date when reciprocal tariffs on major trading partners are expected to go into effect.It’s too early to say if “the inflationary effects will be transitory, especially given that companies and households still have fresh in their minds the recent history of high unanticipated inflation,” Mohamed El-Erian, the economist who called the Fed too cautious in handling the last inflation surge, wrote on X.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access.If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe....