The Federal Reserve can stay patient and wait to see how tariffs and other economic policies of the Trump administration play out before making any changes to interest rates, Chair Jerome Powell said Wednesday.
In his prepared remarks, Powell reiterated that the Trump administration's tariffs are “significantly larger than anticipated."
“The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” he said.
In his prepared remarks, Powell reiterated that the Trump administration's tariffs are “significantly larger than anticipated."
“The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” he said.
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NewsTranscript
00:00Looking ahead, looking forward.
00:02The new administration is in the process of implementing substantial policy changes in
00:07four distinct areas – trade, immigration, fiscal policy, and regulation.
00:16These policies are still evolving, and their effects on the economy remain highly uncertain.
00:21As we learn more, we will continue to update our assessment.
00:26The level of tariff increases announced so far is significantly larger than anticipated,
00:31and the same is likely to be true of the economic effects, which will include higher inflation
00:36and slower growth.
00:39Both survey and market-based measures of near-term inflation expectations have moved up significantly,
00:45with survey participants pointing to tariffs.
00:49Survey measures of longer-term inflation expectations, for the most part, appear to remain well anchored
00:54as well.
00:56Tariffs are highly likely to generate at least a temporary rise in inflation.
01:01Inflationary effects could also be more persistent.
01:05Avoiding that outcome will depend on the size of the effects, on how long it takes for them
01:10to pass through fully to prices, and ultimately on keeping longer-term inflation expectations
01:16well anchored.
01:18Our obligation is to keep longer-term inflation expectations well anchored, and to make certain
01:23that a one-time increase in the price level does not become an ongoing inflation problem.
01:30As we act to meet that obligation, we will balance our maximum employment and price stability mandates,
01:36keeping in mind that without price stability, we cannot achieve the long periods of strong
01:41labor market conditions that benefit all Americans.
01:45As that great Chicagoan Ferris Bueller once noted, life moves pretty fast.
01:53For the time being, we are well positioned to wait for greater clarity before considering any adjustments
01:59to our policy stance.
02:01We continue to analyze the incoming data, the evolving outlook, and the balance of risks.
02:06We understand that elevated levels of unemployment or inflation can be damaging and painful for
02:12communities, families, and businesses.
02:14We will continue to do everything we can to achieve our maximum employment and price stability goals.