#PowellRemarks

Jerome Powell, the Federal Reserve Chair, has made significant remarks on the US economic outlook. Here are the key points:

- *Economic Outlook*: Despite uncertainty and downside risks, the US economy remains solid, with solid growth, a labor market in balance, and inflation running closer to the 2% objective.

- *Inflation*: Inflation has declined sharply from its pandemic highs but remains above the 2% target. Higher tariffs are likely to raise inflation in coming quarters, potentially generating at least a temporary rise.

- *Monetary Policy*: The Fed is well-positioned to deal with risks and uncertainties, waiting for greater clarity before considering policy adjustments. Powell emphasized the importance of keeping longer-term inflation expectations well-anchored.

- *Tariffs and Inflation Risks*: Tariffs could lead to higher inflation and slower growth. The size and duration of these effects remain uncertain, and the Fed will closely monitor incoming data.

- *Labor Market*: The labor market appears to be in solid condition, with low layoffs, moderating job growth, and stable unemployment rates. Wage growth has continued to moderate while outpacing inflation.

In a conversation with Raghuram Rajan, Powell discussed the potential effects of tariffs on inflation and growth, highlighting the uncertainty surrounding the policies. He noted that ¹ ²:

- *Tariff Effects*: Tariffs could lead to a one-time increase in prices, but the risk of more persistent effects depends on factors like the size of the tariffs, how long it takes for them to pass through to prices, and the anchoring of inflation expectations.

- *Supply Chain Disruptions*: Tariffs could disrupt supply chains, potentially leading to extended periods of inflation, as seen during the pandemic with semiconductor shortages.

- *Immigration and Labor Markets*: The decline in immigration has led to stagnant labor growth, but demand for workers has also fallen, keeping the unemployment rate stable.