Inflation returns to 3%? Yellen warns that tariffs will severely impact American families
Yellen stated on the program that although the U.S. inflation rate is showing a slowing trend, Trump's tariffs will lead to a year-on-year increase in the U.S. inflation rate of at least 3%, resulting in a loss of $1,000 in income for average households
Just as Trump criticized Federal Reserve Chairman Powell as a "numbskull" and called for interest rate cuts, Yellen stated that Trump's tariff policy would lead to rising prices and a decline in average household income.
On Thursday Eastern Time, former Federal Reserve Chair and Treasury Secretary Yellen candidly stated on a program that although the U.S. inflation rate is showing a slowing trend, Trump's tariffs will cause the U.S. inflation rate to rise by at least 3% year-on-year and result in an average loss of $1,000 in income for ordinary households. Yellen emphasized:
The latest and most optimistic estimates I see indicate that due to tariffs and their ripple effects, the income of ordinary households will decrease by about $1,000, and the actual amount could be larger, depending on the progress of the tariff plans.
This prediction sharply contrasts with the optimistic sentiment of the Trump administration. On the same day, Trump continued to pressure the central bank for interest rate cuts, leveraging the recent trend of inflation data coming in below expectations, and fiercely criticized Federal Reserve Chairman Powell as a "numbskull."
Ironically, Trump's allies have consistently insisted that tariffs would not drive up inflation—contradicting the judgment of this former official with extensive experience in central banking and the Treasury.
Federal Reserve in Policy Fog: Yellen Suggests Maintaining "Wait-and-See Mode"
As the Federal Reserve Chair from 2014 to 2018, Yellen has a deep understanding of the dilemmas currently facing the central bank. She admitted:
The Federal Reserve does not have a good grasp of how tariffs will affect spending, the labor market, or inflation.
In this uncertainty, Yellen suggested that the Federal Reserve should "worry about the possibility of second-round effects, wage increases, or inflation expectations leading to persistent inflation."
She predicted that the Federal Reserve would "steadfastly maintain a wait-and-see stance," meaning the central bank is unlikely to hastily cut interest rates as Trump demands.
For investors, the core issue is no longer whether tariffs will affect inflation, but rather when this impact will arrive, how large it will be—and how the Federal Reserve will seek to balance political pressure with economic realities
