Fed Holds Rates Steady, Powell Says Tariffs Keeping Inflation Elevated
The Federal Reserve held interest rates unchanged on March 18, with Chair Powell noting that tariffs account for between half and three-quarters of the overshoot above the 2% inflation target. The Fed projects one rate cut this year as it waits for tariff-driven price increases to fade.
Key Takeaways for Importers
The Federal Reserve held interest rates steady on March 18, 2026, as Chair Jerome Powell acknowledged that tariffs are a major driver of persistent inflation. Here is what importers and customs brokers need to know.
Tariffs Account for Half to Three-Quarters of Inflation Overshoot
Powell stated that inflation, measured by the Fed's preferred PCE gauge, remains around 3% — well above the 2% target. He estimated that "some big chunk of that, between a half and three-quarters, is actually tariffs." This confirms what the trade community has experienced firsthand: Section 232, Section 301, and reciprocal tariffs are directly flowing into consumer prices.
One-Time Price Jump, Not Permanent Inflation
The Fed's base case is that tariff-driven price increases are a one-time adjustment, not a permanent inflationary spiral. Powell expects tariff impacts to "fade over time" — but cautioned the Fed needs to be "humble" about predicting how long that takes, noting the post-COVID inflation flare-up took two years to cool.
Rate Cut Outlook: One Cut This Year
The Fed now projects just one rate cut in 2026, down from earlier expectations. Powell made clear that rate cuts depend on seeing core inflation come down as tariff impacts pass through. "If we don't see that progress, then you won't see the rate cut," he said. For importers carrying inventory costs or financing trade, this means elevated borrowing costs persist.
Tariff Uncertainty Remains
Powell noted a "lack of clarity over future tariff rates." After the Supreme Court struck down broad global duties under emergency authority, the Trump administration is replacing them with targeted tariffs under unfair trade practices law against 16 trading partners. The Section 301 probes are expected to produce new tariff schedules, but timing and rates remain unclear.
Energy Prices Add Pressure
Oil prices above per barrel — driven by the Iran conflict — are creating additional inflationary pressure. Powell said the Fed is watching how diesel, jet fuel, and petroleum-based input costs filter into core inflation. For importers, this means higher freight costs layered on top of tariff duties.
What This Means for Your Business
The combination of elevated tariffs, uncertain trade policy, and high energy costs creates a challenging environment for importers. Key actions:
- Review your tariff exposure — Use our Trade Remedies database to check AD/CVD duty rates on your products
- Monitor tariff schedules — Track Section 232, 301, and reciprocal tariff changes via our Tariff Schedules page
- Factor in the full landed cost — With rates staying high and energy costs elevated, accurate landed cost calculations are critical for pricing decisions
- Watch for new Section 301 actions — The 16-country trade probes could produce new duties by mid-2026