The head of the US central bank remains cautious about cutting interest rates at a faster pace despite the growing impact of the administration's tariff policies.



Federal Reserve Chair Jerome Powell spoke in Chicago, Illinois, on Wednesday. He said: "The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth."



Powell said household and business surveys show a sharp decline in sentiment, largely on trade policy concerns.



But his cautious stance on accelerating rate cuts was revealed when he said that the US economy is still solid and inflation is just above the bank's target of 2 percent.



Right after Powell's comment, investors in New York rushed to sell shares in Wednesday's trading. The Dow Jones Industrial Average briefly dropped more than 900 points.



The Dow ended the day at 39,669, losing nearly 700 points, or 1.7 percent, from the previous day's close.