U.S. Federal Reserve Chair Jerome Powell said the central bank will wait and watch the situation before making any decisions on interest rates, although Trump’s tariffs are likely to drive up inflation temporarily.

Speaking to the Economic Club of Chicago on Wednesday, Powell said the tariffs are highly likely to generate at least a temporary rise in inflation.

Powell said the Trump administration’s tariffs are “significantly larger than anticipated,” adding that the same is likely to be true of their economic effects, which will include higher inflation and slower growth.

He said that for the time being, the Federal Reserve is well positioned to wait for greater clarity on the impact of policy changes, hinting he is not considering cutting interest rates at the moment.