Federal Reserve Chair Jerome Powell said Wednesday that he expects President Donald Trump’s tariffs policy to cause higher inflation and slower economic growth, complicating potential central bank efforts to ease the fallout.

“The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell told the audience at the Economic Club of Chicago.

Powell’s remarks immediately sent stocks lower as investors digested the top central banker’s concern about the tariffs.

Within minutes, the Dow Jones Industrial Average fell 690 points, or 1.7%, more than tripling losses suffered over the course of the day before Powell’s comments.

As Powell spoke, the S&P 500 dropped 2.3%, while the tech-heavy Nasdaq plunged 3.4%. Both indexes deepened losses suffered earlier in the day.

Stocks had fallen in early trading on Wednesday after chipmaker Nvidia disclosed it was recording a $5.5 billion charge in accordance with a new Trump administration restriction on exports to China.

Wednesday’s address marked Powell’s first public remarks since Trump last week paused his so-called “reciprocal tariffs” on most countries for 90 days. Stocks soared minutes after Trump’s announcement, recovering much of the losses suffered in the aftermath of the “Liberation Day” tariffs start a week earlier. It amounted to one of the most volatile weeks in the history of Wall Street.

“Markets are struggling with a lot of uncertainty and that means volatility,” Powell said on Wednesday. Still, he added, the volatility reflected the significance of the policy changes, rather than abnormal behavior in the markets.

“They’re functioning just about as you’d expect them to function,” Powell said.

At the same time Trump paused some tariffs last week, he also increased tariffs on China, bringing levies on Chinese goods to a cumulative level of 145%. In response, China hiked tariffs on U.S. goods to 125%, escalating a trade war between the world’s two largest economies.

Powell said earlier this month that he expected Trump’s tariff policy would hike prices and slow economic growth, while noting that key indicators “still show a solid economy.”

Policy changes implemented by the White House have contributed to a “highly uncertain outlook,” Powell said.

Last month, the Fed opted to hold interest rates steady, even as the central bank said it expected higher inflation and slower economic growth than it had forecast in December. The Fed will announce its next interest-rate decision on May 7.

Powell on Wednesday indicated that the Fed may approach interest rates with restraint as policymakers observe the economic effects of Trump’s tariffs.

“The U.S. economy is still in a solid position,” Powell said. “For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”