Federal Reserve Chair Jerome Powell had the economy on course for a soft landing. The president’s trade war threatens that.

The duties, Powell acknowledged, could both slow growth and lift prices, which puts the Fed in a tough spot. It would usually cut rates to boost growth and hiring, while it would raise them to cool spending and inflation. Powell signaled that if the two goals came into conflict, Fed officials would put more weight on inflation concerns.

The Federal Reserve held interest rates steady on Wednesday but said the risks of both higher inflation and unemployment had risen, further clouding the economic outlook as the U.S. central bank grapples with the impact of Trump administration tariff policies.