Federal Reserve Chief Highlights Impact of Tariffs on Inflation
Jerome Powell discusses challenges of assessing tariff effects on inflation rates and the economy.
In a press conference following the decision to keep interest rates unchanged between 4.25% and 4.50%, Federal Reserve Chairman Jerome Powell addressed the complexities of determining the actual impact of tariffs imposed by former President Donald Trump on inflation rates.
He indicated that the slowdown in inflation might take longer than anticipated due to the enforcement of these tariffs.
Powell noted the difficulty in distinguishing the portion of price inflation attributable to tariffs from that arising from other factors.
Surveys from businesses and households have increasingly indicated heightened concerns regarding inflation and near-term inflation expectations, although long-term inflation outlooks remain 'generally stable.'
The Federal Reserve officials maintained their forecast for interest rate cuts this year at two times, equivalent to a total drop of 50 basis points, with an anticipated rate of approximately 3.8% by year-end.
Powell suggested that tariffs typically lead to a slowdown in growth and an initial rise in inflation.
However, he acknowledged that any inflation increase linked to the tariffs is likely to be 'transitory.'
He stated, 'I believe that with the inflation associated with tariffs, progress towards the Fed's annual inflation target of two percent may be hindered.' Currently, the impacts of Trump's tariff policies on the economy remain uncertain, largely dependent on how quickly tariff-related inflation permeates through the economy and the stability of inflation expectations.
Powell mentioned that the strong inflation readings observed in the past two months were unexpected and could be a result of consumer purchasing behavior ahead of the implementation of tariffs.
The Federal Reserve is actively monitoring these effects but noted the significant 'noise' surrounding tariff announcements and their delays.
Policymakers at the Federal Reserve forecast a slowdown in U.S. economic growth alongside an uptick in inflation, as detailed in updated guidance released.
This situation raises concerns about potential stagflation in the world's largest economy, amid the ramifications of the ongoing trade war led by Trump against key U.S. trading partners.
The Federal Reserve identified a rise in uncertainty surrounding the future of the U.S. economy, lowering its average growth rate forecast for this year to 1.7% from a previous estimate of 2.1%.
Meanwhile, the central bank raised its core inflation forecast for the year-end to 2.8%, up from 2.5%.
He indicated that the slowdown in inflation might take longer than anticipated due to the enforcement of these tariffs.
Powell noted the difficulty in distinguishing the portion of price inflation attributable to tariffs from that arising from other factors.
Surveys from businesses and households have increasingly indicated heightened concerns regarding inflation and near-term inflation expectations, although long-term inflation outlooks remain 'generally stable.'
The Federal Reserve officials maintained their forecast for interest rate cuts this year at two times, equivalent to a total drop of 50 basis points, with an anticipated rate of approximately 3.8% by year-end.
Powell suggested that tariffs typically lead to a slowdown in growth and an initial rise in inflation.
However, he acknowledged that any inflation increase linked to the tariffs is likely to be 'transitory.'
He stated, 'I believe that with the inflation associated with tariffs, progress towards the Fed's annual inflation target of two percent may be hindered.' Currently, the impacts of Trump's tariff policies on the economy remain uncertain, largely dependent on how quickly tariff-related inflation permeates through the economy and the stability of inflation expectations.
Powell mentioned that the strong inflation readings observed in the past two months were unexpected and could be a result of consumer purchasing behavior ahead of the implementation of tariffs.
The Federal Reserve is actively monitoring these effects but noted the significant 'noise' surrounding tariff announcements and their delays.
Policymakers at the Federal Reserve forecast a slowdown in U.S. economic growth alongside an uptick in inflation, as detailed in updated guidance released.
This situation raises concerns about potential stagflation in the world's largest economy, amid the ramifications of the ongoing trade war led by Trump against key U.S. trading partners.
The Federal Reserve identified a rise in uncertainty surrounding the future of the U.S. economy, lowering its average growth rate forecast for this year to 1.7% from a previous estimate of 2.1%.
Meanwhile, the central bank raised its core inflation forecast for the year-end to 2.8%, up from 2.5%.
