Powell released the eagle, Waller released the pigeon, and a heated debate was brewing within the Federal Reserve

On April 17, Federal Reserve Chairman Jerome Powell said on Thursday that tariffs could create “a challenging situation, and the Fed’s dual mission goal is in a tight state.” He added, “We can’t achieve it without price stability… strong labor market conditions”, suggesting that inflation is the bigger focus, rather than the labor market. Powell reiterated that higher-than-expected tariffs will push inflation up and slow economic growth. Crucially, the extent to which price pressures will persist will depend in part on the Fed’s response. This is Powell’s second speech in two weeks, indicating that he believes that the Trump administration’s new tariff measures have a reason for the central bank to respond relatively hawkishly and not choose to cut interest rates for the time being. Powell’s stance contrasts sharply with Fed Governor Waller’s more dovish guidance, suggesting that a debate is brewing within the Fed about how to understand and respond to Trump’s aggressive tariff policy.