Fed's Williams says tariffs will push up inflation and unemployment

New York Federal Reserve President John Williams said the Trump administration's current trade policies will accelerate inflation this year.

Williams said he expects tariffs to push inflation up to between 3.5% and 4% this year.

That would represent a marked rise in price pressures from the current level of the Personal Consumption Expenditures Price Index, which was 2.5% on a year-over-year basis in February.

The PCE is the Fed's main inflation gauge.

"It's hard to know with any precision how the economy will evolve," Williams said in prepared remarks to the Puerto Rico Chamber of Commerce.

"Given the uncertain effects of recently announced tariffs and other policy changes, there is an unusually wide range of outcomes that could transpire."

He said it was critical for the U.S. central bank to prevent longer-run expectations of price pressures from becoming unmoored.

In light of that uncertainty tied to Trump's tariff moves, the economy's strong start to the year is likely to give way toward something less favorable, Williams said.

"Given the combination of the slowdown in labor force growth due to reduced immigration and the combined effects of uncertainty and tariffs, I now expect real GDP growth will slow considerably from last year's pace, likely to somewhat below 1%," while the jobless rate should rise from its current level of 4.2% to between 4.5% and 5%.