Powell's warning triggers sell-off on Wall Street

Jerome Powell dropped a bombshell in Chicago: Trump’s tariffs threaten to spike inflation and slow economic growth. The Fed won’t move until they see how this plays out.

Immediate results:

• S&P 500 fell 2.8%
• Treasury yields declined
• Dollar weakened

Market sentiment: The message was perceived as hawkish. Investors tried to pressure Powell to intervene if markets drop, but he made it clear that the Fed won’t be a safety net.

The real dilemma: Powell is caught between two fires:

1. Controlling inflation (which tariffs could get out of control)
2. Supporting employment

The risk: stagflation (the 1970s nightmare). Tariffs could create the perfect environment for stagflation.

Takeaway for traders: The Fed keeps rates on hold until there’s more clarity. That means more volatility as the market digests the true impact of these trade policies.