#PowellRemarks

Federal Reserve Chair Jerome Powell recently delivered remarks on the economic outlook at the Economic Club of Chicago. Here are the key points from his speech:

Economic Outlook

- The US economy remains in a solid position despite heightened uncertainty and downside risks.

- The labor market is at or near maximum employment, with nonfarm payrolls growing by an average of 150,000 jobs per month in the first quarter.

- Inflation has declined significantly from its pandemic highs but remains above the 2% objective, with recent readings showing a 2.3% increase in total PCE prices and 2.6% in core PCE prices.

Monetary Policy

- The Fed will balance its maximum employment and price stability mandates, considering the implications of policy changes on the economy.

- Tariffs are likely to generate a temporary rise in inflation, and the Fed will monitor incoming data to determine the appropriate policy stance.

- The Fed aims to keep longer-term inflation expectations well-anchored and prevent a one-time price level increase from becoming an ongoing inflation problem.

Key Challenges

- The new Administration's policy changes in trade, immigration, fiscal policy, and regulation will have uncertain effects on the economy.

- The level of tariff increases announced so far is significantly larger than anticipated, which could lead to higher inflation and slower growth.

Fed's Response

- The Fed will continue to analyze incoming data, the evolving outlook, and the balance of risks to determine the appropriate policy stance.

- For now, the Fed is well-positioned to wait for greater clarity before considering any adjustments to its policy stance.¹