The president of the Federal Reserve, Jerome Powell, said the group in a speech on Wednesday that the Central Bank could be found in a dilemma between inflation control and support for economic growth.
With the high uncertainty about the impact that President Donald Trump will have, the leader of the Central Bank said that although he expects greater inflation and lower growth, it is not clear where the Fed will need to dedicate a greater approach.
“We can find ourselves on the challenging stage in which our double society objectives are in tension,” Powell said in comments prepared before the Chicago Economic Club. “If that happened, we would like the economy to be of each objective, and the potentially different time horizons on which those respective gaps would be anticipated.”
The Fed has the task of guaranteeing stable prices and full employment, and economists, including those of the Fed, see threats to both of the taxes. Tariffs essentially act as an import tax, although their direct link with historical inflation has bone spots.
In a question and answer session after his speech, Powell said the tariffs “probably move us away from our goals … Probable for this year’s balance.”
Powell is not an indication about where he sees interest rates, but pointed out that “for the moment, we are well positioned to expect greater clarity before considering our policy position.”
The actions reached the minimums of the session when Powell spoke while the treasure yields were reduced.
In the case of higher inflation, the Fed would maintain stable interest rates or even increase them to cushion the demand. In the case of slower growth, the Fed could be persuaded with lower interest rates. Powell emphasized the importance to keep inflation executions controlled.
Markets expect the Fed to begin to reduce rates again in June and promulgate cuts of percentage points of three or four quarters by the end of 2025, according to the Fedwatch meter of the CME group.
Fed officials generally consider that tariffs are a unique impact on prices, but the expansive nature of Trump’s duties could alter that trend.
Powell pointed out that the survey and short -term inflation -based measures are increasing, he thought that the long -term perspective remains close to the 2% objective of the Fed. The key inflation measure of the FED is expected to show a rate of 2.6% for March, he said.
“It is very likely that tariffs generate at least one temporary increase in inflation,” Powell said. “The inflationary effects could also be more persistent. Avoiding that result will be deepened in the size of the effects, how long it takes them to pass completely and, ultimately, in maintaining in the long term.”
The speech was largely similar to the one he spoke earlier this month in Virginia, and in some literal passages.
Powell pointed to threats to growth and inflation.
The gross domestic product for the first quarter, which will be informed at the end of this month, is expected to show little growth in the United States economy for the period from January to March.
In fact, Powell pointed out that “the data in the hand committed suicide so much that growth has slowed in the first quarter of last year’s solid rhythm. Despite the strong sales of motor vehicles, the general consumer spending is expected to have grown fashionable, replaceing duration duration during companies to advance to possible rates, they are expected to weigh on the growth of the GDP.”
Earlier in the day, the Department of Commerce reported that retail sales increased 1.4% better than the least in March. The report showed that a large part of the growth came from cars buyers seeking purchases ahead of rates, although several other sectors also showed solid gains.
After the report, the Atlanta Fed said that the GDP grows at a rate of -0.1% in Q1 by adjusting an unusual increase in gold imports and exports. Powell described that the economy was in a “solid position” even with the deceleration expected in growth.
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