Summary of Jerome Powell's Speech – April 16, 2025
Jerome Powell, the Chairman of the U.S. Federal Reserve, delivered an important speech at the Economic Club in Chicago, addressing the impact of new trade policies – particularly the tariffs imposed by former President Donald Trump – on the American economy.
Key points:
1. The impact of tariffs on inflation and growth:
Powell warned that tariffs could lead to a significant increase in inflation.
He pointed out that these trade policies could cause a slowdown in economic growth, creating an environment similar to stagflation (stagnation + inflation).
2. Monetary policy and interest rate stabilization:
Powell confirmed that the Federal Reserve will keep interest rates as they are currently.
He clarified that the central bank will hold off on taking any new steps until the effects of tariffs on the economy become clear.
3. Market reactions:
Markets immediately fell after the speech; the S&P 500 index dropped by 2.8%.
Treasury yields fell and the U.S. dollar weakened.
Investors viewed the speech as "leaning towards tightening", especially with Powell's rejection of the idea of Federal intervention to support the markets in case of a downturn.
4. Challenges facing the Federal Reserve:
Powell emphasized that the Federal Reserve is struggling to balance the goal of reducing inflation and supporting employment.
Tariffs could hinder this balance and complicate monetary policy.
In summary: Jerome Powell's speech reflects a clear concern about the future of the American economy under new trade policies, and indicates that the Federal Reserve will adopt a "wait and see" approach to avoid making hasty decisions that could affect economic stability.