Chicago: The US Central Bank has said that it is preventing any changes in interest rates, as concerns increase that increasing tariffs can increase inflation by weighing on economic growth.
Jerome Powell, president of the US Federal Reserve, said on Wednesday that the fed would wait for more data on the direction of the economy before changing the interest rates, and recently the tariff policy will be characterized by a logical reaction to the dramatic change of Trump administration in tariff policy.
Powell said in a comment prepared to the Economic Club of Chicago, “For some time, we are well deployed to wait for more clarity before considering any adjustment in our policy stance.”
His comment noted the potentially difficult situation developed for the fed, with inflation pushed by tariffs, while development – and potentially employment – weakens.
The Fed tries to keep inflation stable at 2% while maintaining maximum employment.
“I think we are moving away from those goals, perhaps for this year’s balance. Or not at least no progress,” Powell said, referring to the impact of the tariff which have proved to be big – at least announced – even in early fed planning estimates compared to the most serious scenarios. He said that the US started the year around the entire employment and is expected to fall to the central bank’s target with inflation.
Outlook is now extremely uncertain, Powell said, with “fundamental changes” in policy that provide any clear similarities to study businesses and economists.
In his first public comment on recent financial instability, Powell said that he felt that bonds and stock markets were working well, reflecting investors with swings in security values to adjust investors in the new scenario.
Asked if there is a “fed put” – where the market will be stepped into the market, if the markets decline – Powell said, “No, with an explanation … what is going on … the market is going on … the markets are struggling with great uncertainty and means that you are working.”
Before Pavel’s speaking before in the session, the US shares later increased their loss.
“I think people were expecting Powell to be neutral and he was a Hawkish instead,” Jim Carol said, “Charlston, South Carolina, a senior money consultant of the Ballet Rock Private Wealth in South Carolina said the additional loss in the shares after the presence of Powell. “When asked if there was any such thing as a Fed for the stock market, his answer was ‘no’.”
Uncertainty increased
In his prepared comments, Powell said that US economic growth seems slow, increasing the consumer spending marginally. To avoid tariffs, a crowd of imports is also likely to weigh on the estimates of GDP, in which the feeling deteriorates.
“Despite uncertainty and negative risks, the American economy is still in a solid position,” Powell said. But “Data in the hand so far suggests that the growth in the first quarter has slowed down from the solid speed of the previous year.”
External analysts saw slow growth in the year, while “the house and business enhances the uncertainty about the fast decline and attitude in the spirit, showing large -scale trade policy concerns,” Powell said, Powell said, referring to the rapid change in import taxes levied by President Donald Trump.
The benchmark interest rate of the Fed is currently determined in the range between 4.25% and 4.5%, where it remains after a series of rate cuts from December to the end of last year.
Since then, the progress has slowed down on restoring inflation for 2% target of Fed.
Despite the uncertainty of Trump’s tariff declarations and the nature of the back and forth, a decision on their potential impact will be central for the upcoming fed debate whether to leave the benchmark interest rate unchanged, reduce it-or consider an increase in rate.
“Inflation in tariffs is likely to increase at least temporary increase in tariffs. Inflation may also have more frequent effects,” said Powell. “The result will depend on the size of the effects, how much time it takes to them to pass perfectly, and ultimately, on anchoring the hopes of long -term inflation well,” an AIM officials have started insisting.
While the measures for inflation expectations in the short term period due to tariffs “have increased considerably”, Powell said long -term expectations that Fed watches remain the most closely in line with Fed’s inflation target.
Keeping an eye on employment even with Fed, Powell said that the labor market remained “in solid position” and “in or near maximum employment”.
But should the fed be caught between rising inflation and rising unemployment rate, “We will consider how far the economy is from each target, and potentially different time horizons on which the related gaps will be estimated to be shut down.”
