Jerome Powell emphasized the uncertainty of the US President Donald Trump's duties on the American economy. Explained that Although he expects higher inflation and lower growth, it is not clear where the Fed will have to pay more attention.
“We can find ourselves in a difficult scenario in which our double mandate goals will be in conflict” – said Powell in a speech before the Economic Club of Chicago.
“If that happened, rWe would three how far the economy is from every purpose and potentially different time horizons in which these appropriate gaps would close” – he emphasized.
Fed, as it reminds, It is designed to provide stable prices and full employment. Meanwhile, many economists, including those from the Fed, notice that import duties pose a threat to both of the listed. Remind you that customs duties actually act as an import taxalthough their direct relationship with inflation was historically irregular.
What then will Fed do in the coming months? What changes from interest rates can we expect? Powell did not give any information on this topic. He noticed, however, that “For now, we are in a good position to wait for greater clarity before we consider any changes in our political position“.
Markets expect that The Fed will start re -lowering the feet in June and introduce reductions by three or four percentage points by the end of 2025.
FED officials generally believe that duties are a one -time hit in the price, but the expansive nature of Trump's duties can change this trend.
Powell noticed that short -term inflation indicators based on surveys and market research are growing, although long -term perspectives remain close to 2 percent. purpose.
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“It is expected that the key Fed inflation rate will show a 2.6 percent rate. in March” – he said.
“Customs duties will most likely generate at least a temporary increase in inflation” – said Powell.” Inflation effects may also be more durable. Avoiding such a result will depend on the size of the effects, the time that will passbefore they fully translate into prices, and ultimately from maintaining long -term inflation expectations at a stable level” – he emphasized.
