12:15 PM EDT, 04/11/2025 (MT Newswires) -- The Trump Administration's tariffs have the potential to push the rate of inflation up to around 3.5% to 4% this year while also slowing growth due to reduced immigration, well above the Federal Reserve's 2% target, New York Federal Reserve President John Williams said Friday at the Puerto Rico Chamber of Commerce.

"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%," said Williams. "With this downshift in the pace of growth, I expect the unemployment rate to rise from its current level of 4.2% to between 4-1/2 and 5% over the next year. I expect increased tariffs to boost inflation this year to somewhere between 3-1/2 and 4 percent."

However, Williams noted a high degree of uncertainty that makes monetary policy decisions more difficult, though the current policy stance is positioned to deal with the uncertainty, saying that "the current modestly restrictive stance of monetary policy is entirely appropriate given the solid labor market and inflation still above our 2% goal. Importantly, it gives us the opportunity to assess incoming data and developments and ultimately positions us well to adjust to changing circumstances that affect the achievement of our dual mandate goals."

Williams repeated that the Federal Open Market Committee is attentive to risks to both sides of their mandate but is committed to returning inflation to its goal.

"Elevated uncertainty poses many questions about the future of the economy and the path of monetary policy. It is simply too early to know the answers," Williams said. "But as we learn more about the effects of tariffs and other policies, we'll continue to carefully assess the incoming data, the evolving outlook, and the balance of risks to our goals. Monetary policy is in the right place to manage those risks as best we can."