The markets were hit hard Wednesday following Fed Chair Jerome Powell's shared views on President Trump's tariffs.
At the close, the S&P 500 and tech-heavy Nasdaq Composite dropped 2.2% and 3.1%, respectively. The Dow Jones Industrial Average lost 1.7%, or 700 points, after each of the major indexes were coming off modest declines Tuesday. Stocks were already sharply lower Wednesday morning but kept falling while Powell spoke at an event in Chicago.
Powell expects there to be higher inflation and slower economic growth as a result of Trump’s “significantly larger than anticipated” tariffs.
"The level of tariff increases announced so far is significantly larger than anticipated and the same is likely to be true of the economic effects which will include higher inflation and slower growth," said Powell.
Powell still believes the Fed is in a good position to wait longer on the impact tariffs will have before adjusting interest rates.
"These policies are still evolving and their effects on the economy are highly uncertain," Powell said of the Trump administration's changes in fiscal policy and trade.