#PowellRemarks • Growth and Inflation: Powell noted that while the U.S. economy remains fundamentally solid, growth has decelerated in the first quarter of 2025. Consumer spending has grown modestly, and businesses have increased imports in anticipation of tariffs, which may weigh on GDP growth.  

• Labor Market: The labor market appears stable, with nonfarm payrolls growing by an average of 150,000 jobs per month in the first quarter. The unemployment rate remains low, and wage growth continues to moderate while outpacing inflation. 

• Inflation: Inflation has eased from its pandemic highs but remains above the Federal Reserve’s 2% target. Total PCE prices rose 2.3% over the 12 months ending in March, while core PCE prices increased by 2.6%. 

Monetary Policy Stance:

• Interest Rates: Powell emphasized that the Federal Reserve can afford to be patient before making any changes to interest rates. The current federal funds rate remains in the 4.25%–4.5% range. The Fed is closely monitoring the economic impact of recent policy changes, including tariffs, and will adjust its policy stance as needed.  

• Tariffs and Inflation: The recent tariffs are expected to raise inflation and slow economic growth. Powell acknowledged that the inflationary effects of tariffs might be temporary but could also be more persistent, depending on various factors. The Fed aims to prevent a one-time increase in the price level from becoming an ongoing inflation problem.   

Fiscal Policy Concerns:

• Federal Debt: Powell highlighted that reducing discretionary federal spending will not effectively address the U.S. debt problem. He pointed out that discretionary domestic spending comprises a small and declining portion of federal expenditures. Instead, he emphasized the need for bipartisan reforms targeting the largest contributors to federal outlays: Medicaid, Medicare, Social Security, and rising interest payments.