Fed Chief Focused on Tariffs impact on U.S inflation
Federal Reserve Chairman Jerome Powell indicated on that the Fed was focused on tariffs that would manifest into an ongoing inflation problem.
Quick overview
- Federal Reserve Chairman Jerome Powell highlighted the concern over tariffs potentially leading to ongoing inflation issues.
- He emphasized the importance of maintaining long-term inflation expectations to avoid a one-time price increase becoming a persistent problem.
- Powell warned that achieving strong labor market conditions is dependent on price stability.
- The Fed is facing challenges in balancing its dual mandate of inflation control and maximum employment due to the impact of tariffs.
Federal Reserve Chairman Jerome Powell indicated that the Fed was focused on tariffs that would manifest into an ongoing inflation problem.
Powell made prepared remarks at the Economic Club of Chicago, saying, “Our responsibility is to keep longer-term inflation expectations well anchored and to ensure that a one-time increase in the price level does not become an ongoing inflation problem.”.
The Fed chief emphasized the significance of keeping inflation under control, cautioning that “we cannot achieve the long periods of strong labor market conditions that benefit all Americans without price stability. “
The impact of tariffs, which jeopardize the central bank’s objective of 2 percent inflation and maximum employment, has clouded the Fed’s monetary policy outlook. Powell stated, “We may find ourselves in the difficult situation where our dual-mandate goals conflict.”
“How far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” he added, would be considered by the Fed when making monetary policy decisions in this scenario.
It seems that the tariff effects on the economy are already being felt. Powell stated, “The information available thus far indicates that growth has slowed in the first quarter compared to last year’s strong pace.”
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