Chicago: The head of the Central Bank of the United States. He said he will retain any interest rate change for now, as the economic perspective becomes increasingly uncertain after important changes in commercial policy under President Donald Trump.
The president of the United States Federal Reserve, Jerome Powell, said Wednesday that the Fed would expect more data on the management of the economy before changing interest rates and characterize the recent market volatility as a logical reaction to the dramatic changes of the Trump administration in tariff policy.
“At the moment, we are well positioned to expect greater clarity before considering any adjustment to our policy position,” Powell said in comments prepared to the Chicago Economic Club. His comments noted that a potentially difficult situation is developed for the Fed, in which inflation is pushed by tariffs, while growth, and potentially employment, weakens.
Fed tries to keep 2% inflation stable while maintaining maximum employment as well.
“I think we will move away from those goals, probably for this year’s balance. Or at least not to progress,” Powell said, referring to the impact of rates that have proven to be greater, at least as announced, that even the most severe scenarios devised in the initial planning estimates of the Fed. He pointed out that the United States began the year in its full employment and that inflation is expected to continue falling to the objective of the central bank.
The perspective has now become extremely uncertain, Powell said, with “fundamental changes” in the policy they offer to companies and non -parallel economists to study.
In his first public comments on the recent financial volatility, Powell said he felt that bond and securities markets worked well, with changes in security values that reflect investors that adjusted to the new panorama.
When asked if there is a “fed set”, where the Central Bank would intervene if the markets collapsed, Powell said: “No, with an explanation … the markets are processing what is happening … the markets are fighting with great uncertainty and that means volatility. But having said that the markets are working … conditioned to be in a challenging situation, the markets are doing what they do.
The US actions already went down in the session before Powell spoke, extended their losses later.
“I think people expected Powell to be neutral and he was aggressive,” said Jim Carroll, senior advisor to Rock Rock Private Wealth in Charleston, South Carolina, about additional losses in the actions after Powell’s appearance. “When asked if there is something that a Fed for the stock market, his response was ‘no'”.
Greater uncertainty
In his prepared comments, Powell said that American economic growth seems to be slowing down, with consumer spending growing modestly. It is also likely that an avalanche of imports to avoid tariffs despite the estimates of the gross domestic product, with worsening of feelings.
“Despite the greatest uncertainty and downward risks, the US economy is still in a solid position,” Powell said. But “the data in hand so far suggest that growth has slowed in the first quarter of last year’s solid rhythm.”
External analysts see that growth continues to decrease during the year, while “homes and companies report a strong decrease in high feeling and uncertainty about perspectives, largely reflecting the concerns of commercial policy,” said Powell, referring to the rapid changes in import taxes imposed by President Donald Trump.
The Fed reference interest rate is currently established in a range between 4.25% and 4.5%, where it has remained since December after a series of feature cuts at the end of last year.
Since then, the progress in the restoration of inflation to the objective of 2% of the Fed has slowed.
Despite the uncertainty and the round trip nature of Trump’s tariff ads, a judgment on its probable impact will be central to the next Fed debate about whether to leave the reference interest rate without changes, reduce it, or even consider the increases in the rate.
“It is very likely that tariffs generate at least a temporary increase in inflation. Inflationary effects could also be more persistent,” Powell said. “Avoiding that result will depend on the size of the effects, how long it takes to completely move on to prices and, ultimately, to maintain well -term inflation expectations well anchored,” AIM Fed officials have begun to emphasize.
While inflation expectations measures during short -term periods “have risen significantly” due to tariffs, Powell said that the expectations for the longest term that Fed watches remain consistent with the inflation objective of the Fed.
With the Fed also watching employment, Powell said the labor market remained “in solid condition” and “in or close to maximum employment.”
But if the Fed is trapped between the increase in inflation and an increasing unemployment rate, “we would consider how far is the economy of each objective and the potentially different time horizons on which those respective gaps would be closed.”
