Jerome Powell Remarks:
Federal Reserve Chair Jerome Powell recently shared his insights on the US economic outlook at the Economic Club of Chicago.
Here are the key points from his remarks:
1. Economic Outlook: Despite uncertainty and downside risks, the US economy remains solid, with the labor market near maximum employment. However, inflation is still above the 2% objective.
2. Inflation Concerns: Powell noted that recent inflation readings are above expectations, with total PCE prices rising 2.3% over the 12 months ending in March. Core PCE prices, excluding food and energy, increased 2.6%.
3. Tariff Impact: The new administration's tariff policies are expected to lead to higher inflation and slower growth. Powell emphasized that tariffs could generate a temporary rise in inflation, and it's crucial to keep longer-term inflation expectations well-anchored.
4. Monetary Policy: The Fed will closely monitor incoming data and assess the implications of policy changes on the economy. Powell stated that the Fed may need to balance its dual-mandate goals – maximum employment and price stability – which could be in tension due to the tariff policies.
5. Future Actions: For now, the Fed is well-positioned to wait for greater clarity before considering any adjustments to its policy stance. Powell emphasized the importance of keeping inflation expectations anchored to achieve long periods of strong labor market conditions.
Powell's remarks highlight the challenges the Fed faces in navigating the current economic landscape, particularly with regard to inflation and tariff policies. The Fed will continue to analyze incoming data and adjust its policy stance accordingly.