President Donald Trump’s global trade war has significantly raised the bar for the Federal Reserve to lower interest rates, as tariffs risk worsening an already knotty inflation problem while also damaging growth.

Fed Chair Jerome Powell drove home that message in a hotly anticipated speech that came at the end of a turbulent week as financial markets melted down after Trump’s tariff plans were revealed.

The measures would lead to higher inflation and slower growth than initially expected, Powell warned during an event in Arlington, Virginia, on Friday. He showed concern about the souring economic outlook, but his emphasis on the potential inflationary effect of the new tariffs made clear that it was a significant source of angst.

“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said. The Fed’s mandate includes two goals, fostering a healthy labor market and maintaining low, stable inflation.

Before Trump’s return to the White House, inflation was already proving to be stubbornly sticky, staying well above the Fed’s 2% target. Yet the economy had stayed remarkably resilient, leading the central bank to adopt a more gradual approach to interest rate cuts that culminated in it pausing reductions in January. At that policy meeting, Powell established that the Fed would need to see “real progress on inflation or, alternatively, some weakness in the labor market” to restart cuts.

But with inflation set to soar because of tariffs, it will take tangible evidence that the economy is weakening significantly to get the central bank going again. That could mean that rate cuts are pushed off until much later this year or even delayed until next year if that deterioration takes time to materialize.“They will not be inclined to be preemptive to cut rates to avoid what may be a downturn,” said Richard Clarida, a former vice chair at the Fed who is now a global economic adviser at Pimco, an investment firm. “They’re actually going to have to see an actual crack in the labor market.”

Clarida said he would look for a “material” rise in the unemployment rate or a “very sharp slowdown, if not a contraction” in monthly jobs growth to account for what he expected would be a significant lurch higher in inflation.

The latest jobs report, which was released Friday, showed that on the eve of Trump’s latest tariff blitz, the labor market was far from cracking. Employers added 228,000 jobs in March, and the unemployment rate ticked up to 4.2% as participation in the labor market rose.

Any enthusiasm about the latest data was quickly overtaken by a torrent of worries about the economic outlook — concerns Trump’s top economic advisers sought to address Sunday.

Kevin Hassett, director of the White House National Economic Council, acknowledged that the president’s approach could exacerbate inflation. “There might be some increase in prices,” he said on ABC’s “This Week.” But he insisted that Trump’s plan would ultimately reverse a long-running trend of importing lower-cost products in exchange for job losses.

“We got the cheap goods at the grocery store, but then we had fewer jobs,” he said.

Treasury Secretary Scott Bessent also sought to downplay the prospects of a recession, telling NBC’s “Meet the Press” on Sunday that there would be an “adjustment process.”

Economists across Wall Street are much more gloomy about the outlook. Many have sharply raised their recession odds alongside their forecasts for inflation. Those economists fear that Trump’s tariffs, which are a tax on imports, will eventually decimate consumer spending, squeeze businesses’ profit margins and potentially lead to layoffs that push the unemployment rate above 5%.

Many in this cohort expect the Fed to lower interest rates swiftly as a result, beginning as early as June. Federal funds futures markets reflect an even more aggressive response, with five quarter-point cuts priced in for this year.

Perhaps the most important determinant of when the central bank will restart rate cuts is what happens with inflation expectations. Beyond a year ahead, expectations have stayed somewhat stable, aside from some survey-based measures that are seen as less reliable than others.

If those expectations begin to wobble in a more notable way, the Fed would become even more hesitant to cut and would need to see even more economic weakness than usual, said William English, a Yale University professor and a former director of the Fed’s division of monetary affairs.

Eric Winograd, an economist at the investment firm AllianceBernstein, said Powell’s inflation-focused posture Friday would help to avoid that outcome. “The name of the game is: You talk tough,” he said. “You keep inflation expectations where they are, and, by doing that, you preserve your ability to ease later if it’s necessary.”