Inflation in the U.S. Could Rise in the Near Term, According to Fed Chair
Powell just addressed how these tariffs could affect inflation and growth, with China already retaliating with a 34% tariff on U.S. goods and additional trade restrictions.
The Fed chair said that after a couple of years of solid growth many analyst now expect slower growth.
As expected, he stated that the Fed will take the wait and see approach to monitor how the trading partners of the U.S will react to these tariffs. as markets anticipate potential rate cuts later this year.
He says that while inflation has gone down significantly, the progress toward the 2% target has slowed. The inflation will likely rise in the next few quarters, but in the long term inflation is on track to the 2% goal.
Our obligation is to keep longer term expectations well anchored. We will continue monitoring, and will wait until we decide on the path for monetary policy.
The Fed faces a challenging situation, balancing inflation risks with economic growth. While the labor market remains relatively steady, with March adding 228,000 jobs, Powells remarks address the growing fears that tariffs could cause inflation to spike while reducing consumer confidence and spending.
Fed officials have already noted the uncertainty tariffs create, which could lead to a slow-down in both business and household spending.
However, experts are divided, with some predicting a sharp rise in inflation and others expecting the Fed to hold off on rate hikes due to the tariff-driven inflationary pressures. As for recession fears, Powell said that while market analysts and experts are raising their expectations for a recession, the Fed cant make such forecasts.
Investors are now expecting more rate cuts, with the risk of a slowdown potentially pushing the U.S. economy toward a recession. Powells comments will be key in determining how the Fed navigates this turbulent period.
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