Catenaa, Wednesday, April 16, 2025- US Federal Reserve Chair Jerome Powell said tariffs are highly likely to generate at least a temporary rise in inflation in the US, while the economy is still stable despite uncertainty.
In a speech to the Economic Club of Chicago, Powell said that tariffs imposed by President Trump are highly likely to generate at least a temporary rise in inflation.
“The inflationary effects could also be more persistent. Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored,” he said.
He said despite heightened uncertainty and downside risks, the U.S. economy is still in a solid position while the labor market is at or near maximum employment.
“Inflation has come down a great deal but is running a bit above our 2% objective,” he said.
Powell said the new administration is in the process of implementing substantial policy changes in trade, immigration, fiscal policy, and regulation. “Those policies are still evolving, and their effects on the economy remain highly uncertain. As we learn more, we will continue to update our assessment,” he said.
He said both survey- and market-based measures of near-term inflation expectations have moved up significantly, with survey participants pointing to tariffs.
Furthermore, he said the data in hand so far suggest that growth has slowed in the first quarter from last year’s solid pace, as strong imports during Q1, reflecting attempts by businesses to get ahead of potential tariffs, are expected to weigh on GDP growth.
“For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance. We continue to analyze the incoming data, the evolving outlook, and the balance of risks,” Powell said.
