Powell's alert adjusts the bets: How much will the Fed delay rate cuts?
The alerts that Jerome Powell, chairman of the Federal Reserve of the United States (Fed), issued yesterday after the monetary policy meeting have divided the bets among analysts and the market.
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"The risks of higher unemployment and higher inflation seem to have increased," said the central banker yesterday about the effects of Donald Trump's tariff policies. These remarks came after the decision of the Federal Open Market Committee (FOMC) to keep the interest rate unchanged, in the range of 4.25% – 4.50%.
"The Fed is trying to be very cautious in the face of the high uncertainty that is currently being experienced. While it is very likely that the implementation of tariffs will have an upward impact on inflation and a downward impact on economic growth and employment, the magnitudes are very unclear," said analysts from Grupo Financiero Banorte (BMV:GFNORTEO).
By acknowledging a high degree of uncertainty and lack of clarity about the effects of Donald Trump's tariff policies on the U.S. economy, Powell has insisted that "we do not have to rush" to adjust the rates again.
Analysts from Monex said that in the coming months, a deterioration in employment and an inflationary spike could be observed as a direct consequence of the tariffs. In light of this, they considered that the Fed "is buying time to identify which of the two mandates (price stability and maximum employment) is affected first and most intensely, and thus define."
