Fed president says new rates should raise inflation and that the Central Bank will await greater clarity before adjusting interest rates
Federal Reserve President Jerome Powell said on Friday that he expects President Donald Trump’s fares to increase inflation and reduce growth, and indicated that the Central Bank will not move on interest rates until it has a clearer idea of the final impacts. In a speech made for business journalists in Arlington, Virginia, Powell said the Fed faces a “highly uncertain perspective” because of the new reciprocal taxes announced by the president last Wednesday.
According to CNBC, although he said the economy seems strong at the moment, he emphasized the threat that tariffs represent and indicated that the Fed will be focused on maintaining inflation under control.
“Our obligation is to maintain well -term long -term inflation expectations and ensure that a unique increase in price level is not a continuous inflation problem,” Powell said in prepared comments. “We are well positioned to wait for more clarity before considering any adjustments in our political stance. It is too early to tell what the appropriate way to monetary policy will be.”
The comments were made shortly after Trump asked Powell to “stop doing politics” and cut interest rates because inflation was low.
“I have a habit of not responding to comments from elected authorities, so I don’t want to be seen doing it. It’s just not appropriate to me,” Powell said at the beginning of a question and answers session after his speech.
There has been a flood of sales on Wall Street after the 10%general tariff announcement, along with a series of reciprocal charges that are much higher for many important business partners.
Powell noted that the announced tariffs were “significantly larger than expected.”
“The same will probably be true for economic effects, which will include higher inflation and slower growth,” he said. “The size and duration of these effects remain uncertain.”
Inflation
Although Powell has been cautious about how the Fed will react to change, markets are pricing an aggressive set of interest rates from June, with a growing probability that the Central Bank cuts at least one percentage point of its main loan rate by the end of the year, according to CME Group data.
However, the Fed is responsible for maintaining inflation anchored in full employment.
Powell emphasized that fulfilling the inflation side of his mandate will require maintaining expectations of inflation under control, something that may not be easy to do with Trump by pressing tariffs against US business partners, some of which have already announced retaliatory measures.
A greater focus on inflation would also probably prevent the Fed from flexing policy until he evaluated which long -term impact tariffs will have on prices. Typically, policy formulators see tariffs only as a temporary increase in prices and not as a fundamental driver of inflation, but the broad nature of Trump’s movement can change this perspective.
“Although tariffs are highly prone to generate at least a temporary increase in inflation, the effects may also be more persistent,” Powell said. “Avoiding this result would depend on maintaining well -term long -term inflation expectations, the size of the effects and how long it takes them to be fully passed on to prices.”
Basic inflation reached an annual rate of 2.8% in February, part of a general moderation standard that is still well above the target of 2% of the Fed.
Despite high tariff anxiety, Powell said the economy for now “is still in a good place” with a solid job market. However, he has mentioned recent consumer research showing increasing concerns about inflation and lower expectations for future growth, pointing out that long -term inflation expectations are still aligned with Fed’s goals.
With information from CNBC*
Source: https://www.ocafezinho.com/2025/04/05/trump-impoe-tarifas-e-fed-enxerga-risco-inflacionario/
