The content provided discusses the warning issued by Jerome Powell, the President of the Federal Reserve of the United States, regarding the potential impact of the tariffs announced by Donald Trump. Powell highlighted that these tariffs could lead to lower economic growth and higher inflation. He emphasized the need for more data before considering changes to monetary policy despite the risks of stagflation.
Powell noted the uncertainty surrounding the tariffs and their economic effects, including increased inflation and slower growth. He acknowledged the challenges in evaluating the final impact of the tariffs due to the lack of specific details on the targeted goods, the extent of the tariffs, and the potential retaliatory measures from affected countries.
While Powell suggested that the inflationary effects of the tariffs might be temporary, he also warned about the possibility of a more persistent impact. He mentioned the likelihood of price increases in the coming quarters, affecting inflation expectations among businesses and households. However, Powell reassured that long-term inflation expectations remain anchored around the 2% target.
Regarding monetary policy, Powell stated that the Fed is closely monitoring the implementation of Trump’s agenda on trade, immigration, fiscal, and regulatory matters before considering adjustments to interest rates. He emphasized the importance of maintaining long-term inflation expectations and preventing temporary price increases from leading to sustained inflationary pressures.
Powell also commented on the US labor market, describing it as relatively balanced and not a significant source of inflationary pressures. He explained that factors such as low layoffs, moderate job growth, and a slowdown in the growth of the active population have helped maintain a stable unemployment rate.
In conclusion, Powell highlighted the Fed’s readiness to wait for more clarity on the economic landscape before making any policy changes. He emphasized the importance of anchoring inflation expectations and ensuring that temporary price spikes do not translate into persistent inflationary trends. The Fed’s cautious approach reflects the need to navigate uncertain economic conditions and make informed decisions to support long-term economic stability.
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