 warned that the new tariffs announced by former President Donald Trump are likely to raise inflation and slow down the U.S. economy, delivering a sobering message at the annual Society for Advancing Business Editing and Writing (SABEW) conference. Calling the economic impact “significantly larger than expected,” Powell said the tariffs would likely cause “at least a temporary rise in inflation,” though he also admitted that “it is possible that the effects could be more persistent.” His remarks painted a much grimmer picture than his previous comments last month, when he downplayed the inflationary consequences of the proposed import taxes. “Our obligation is to ensure that a one-time increase in the price level does not evolve into a prolonged inflation problem,” Powell said. The Fed’s dual mandate — to maintain maximum employment and price stability — could be challenged as the economy grapples with rising costs and potentially slowing growth. The tariffs, revealed by Trump earlier this week, have already sent shockwaves through global markets, prompted retaliatory threats from China, and rattled investor confidence. Powell’s warning suggests that the central bank is now reconsidering its near-term monetary policy strategy in light of the unexpected changes in trade policy. Currently, the Federal Reserve’s benchmark interest rate sits at approximately 4.3%. While many on Wall Street had expected the Fed to begin cutting rates this year — with some even forecasting up to five cuts — Powell’s remarks indicate a likely pause, at least until the Fed has more clarity. “There’s a lot of waiting and seeing going on, including by us,” Powell said during a Q&A session, emphasizing the uncertain economic environment created by the tariffs. He also noted that many businesses are delaying investments until the full impact of the duties is better understood. Meanwhile, Trump took to his Truth Social platform to pressure Powell, writing, “This would be a PERFECT time for Fed Chairman Jerome Powell to cut interest rates. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” Economists warn that the U.S. may be entering a precarious phase, where inflation climbs even as economic growth weakens. “The Fed is in a tough spot with inflation set to accelerate and the economy poised to slow,” said Kathy Bostjancic, chief economist at Nationwide. In such a scenario, the central bank may be forced to choose between stimulating the economy or containing inflation — two goals that may now be in conflict. Powell acknowledged that recent inflation data showed a slowdown in progress toward the Fed’s 2 per cent target. Although inflation has dropped considerably from its 2022 peak, signs of stickiness remain. At the same time, consumer sentiment and business outlooks have turned more cautious. Despite these concerns, the U.S. labor market continues to show strength. Government data released Friday showed that 228,000 jobs were added in March. However, the unemployment rate ticked up slightly to 4.2 per cent from 4.1 per cent. Powell cautioned that these numbers reflect pre-tariff conditions and may not accurately predict the months ahead. The longer-term implications of Trump’s tariff policy are still unfolding. For now, the Federal Reserve appears poised to hold steady on interest rates, prioritizing inflation management amid rising uncertainty over trade and global economic stability. With both employment and price stability potentially at risk, Powell made it clear the central bank must tread carefully. “The two goals are in tension — or they may be,” he concluded. For More Interesting News Follow Us on Instagram){kind=link}
Federal Reserve Chairman Jerome Powell on Friday (4) warned that the brand new tariffs introduced by former President Donald Trump are more likely to increase inflation and decelerate the U.S. economic system, delivering a sobering message on the annual Society for Advancing Enterprise Modifying and Writing (SABEW) convention.
Calling the financial influence “considerably bigger than anticipated,” Powell mentioned the tariffs would probably trigger “at the least a brief rise in inflation,” although he additionally admitted that “it’s attainable that the consequences may very well be extra persistent.” His remarks painted a a lot grimmer image than his earlier feedback final month, when he downplayed the inflationary penalties of the proposed import taxes.
“Our obligation is to make sure that a one-time improve within the worth stage doesn’t evolve into a protracted inflation downside,” Powell mentioned. The Fed’s twin mandate — to keep up most employment and worth stability — may very well be challenged because the economic system grapples with rising prices and probably slowing progress.
The tariffs, revealed by Trump earlier this week, have already despatched shockwaves by world markets, prompted retaliatory threats from China, and rattled investor confidence. Powell’s warning means that the central financial institution is now reconsidering its near-term financial coverage technique in mild of the surprising adjustments in commerce coverage.
Presently, the Federal Reserve’s benchmark rate of interest sits at roughly 4.3%. Whereas many on Wall Avenue had anticipated the Fed to start slicing charges this yr — with some even forecasting as much as 5 cuts — Powell’s remarks point out a possible pause, at the least till the Fed has extra readability.
“There’s loads of ready and seeing occurring, together with by us,” Powell mentioned throughout a Q&A session, emphasizing the unsure financial atmosphere created by the tariffs. He additionally famous that many companies are delaying investments till the complete influence of the duties is healthier understood.
In the meantime, Trump took to his Reality Social platform to strain Powell, writing, “This is able to be a PERFECT time for Fed Chairman Jerome Powell to chop rates of interest. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”
Economists warn that the U.S. could also be coming into a precarious part, the place inflation climbs whilst financial progress weakens. “The Fed is in a troublesome spot with inflation set to speed up and the economic system poised to gradual,” mentioned Kathy Bostjancic, chief economist at Nationwide. In such a situation, the central financial institution could also be pressured to decide on between stimulating the economic system or containing inflation — two objectives that will now be in battle.
Powell acknowledged that current inflation information confirmed a slowdown in progress towards the Fed’s 2 per cent goal. Though inflation has dropped significantly from its 2022 peak, indicators of stickiness stay. On the identical time, client sentiment and enterprise outlooks have turned extra cautious.
Regardless of these issues, the U.S. labor market continues to point out power. Authorities information launched Friday confirmed that 228,000 jobs had been added in March. Nevertheless, the unemployment charge ticked up barely to 4.2 per cent from 4.1 per cent. Powell cautioned that these numbers replicate pre-tariff circumstances and will not precisely predict the months forward.
The longer-term implications of Trump’s tariff coverage are nonetheless unfolding. For now, the Federal Reserve seems poised to carry regular on rates of interest, prioritizing inflation administration amid rising uncertainty over commerce and world financial stability.
With each employment and worth stability probably in danger, Powell made it clear the central financial institution should tread fastidiously. “The 2 objectives are in pressure — or they could be,” he concluded.
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