Federal Reserve Chair Jerome Powell recently said that the US economy may slow in the near future. Tariffs will likely cause higher prices and weaker growth, according to Powell. However, despite this less than optimistic view, Powell stated that the Fed will be able to address any issues. However, he and his team will likely be cautious, as they don’t want to increase inflation.
Jerome Powell Warns of Weaker Growth After Tariff Plans
The Fed carefully watched Trump and his actions in his first term, and made adjustments as needed. However, the situation the US economy finds itself in currently is different than 2019. Recent increases in inflation have been significant, and so have potential tariffs. Because of these changes, the central bank is planning on waiting until there are more signs of economic distress. Powell recently said “We’re well positioned to address whatever may come. And in the meantime, I’d say we’re waiting for greater clarity before we consider adjustments.” That indicates that Powell and his team likely won’t cut interest rates soon. While Powell believes in that plan, President Trump does not.
On his social media platform Trump said of Powell, “He is always ‘late’, but he could now change his image, and quickly.” However, Powell and his team seem undaunted by this comment. Powell went on to say that the central bank does not “need to be in a hurry” when it comes to cutting interest rates. He also said “You’ll know more…as the months go by. It’s hard to say exactly when you’ll know, but clearly that learning process is ongoing.” Autulio Bomfim, former adviser to Powell gave a comment on potentially cutting rates. Bomfim claims that if inflation rises, unemployment will rise in the months and years after. Because of that, “that’s a situation where you delay the start of cuts, but once you start cutting, you cut with gusto” said Bomfim.
According to some experts, the Fed does not need to cut rates soon because worries of a recession are due to trade policy, something outside of the Fed’s control. Of this, Steven Blitz, chief US economist at GLobaldData TS Lombard said “The current turmoil is not an interest-rate problem and the point of tariffs is pain to force a redirection of business spending—not to inflate other prices to offset higher tariff costs.”
Featured Image Credit: Markus Winkler; Pexels: Thank You!
