NEWS

Federal Reserve Chairman Jerome Powell said the US economy is "resilient" despite heightened uncertainty and downside risks.

Powell added, during a speech on Wednesday, April 16, that the Federal Reserve is well-positioned to wait for further clarity before considering any changes to its policy stance.

"We are at or close to maximum employment, and inflation is slightly above the 2% target, but has declined significantly."

In the same context, Powell stated that US economic growth is likely to slow during the first quarter of 2025 compared to its strong pace the previous year.

"Strong imports in the first quarter will weigh on GDP growth," Powell said, noting that the sharp decline in business and household confidence and the heightened uncertainty reflect trade policy concerns.

The Federal Reserve Chairman affirmed that the US labor market is resilient, broadly balanced, and not contributing to inflation.

Implications of Tariffs

Regarding the implications of the tariffs announced by US President Donald Trump earlier this month, Powell said, "So far, higher-than-expected tariffs are likely to mean higher inflation and slower growth."

He stated that personal consumption expenditures (PCE) prices are likely to rise 2.3% year-on-year in March, with core PCE prices expected to grow 2.6%.

The Fed Chairman said, "The administration's policies are still evolving, and their effects remain highly uncertain."

Powell continued, "The inflationary effects of tariffs could be more persistent, and that ultimately depends on inflation expectations," noting that it is the Federal Reserve's duty to maintain long-term inflation expectations.

Is the Fed Facing a Difficult Situation?

In a separate context, the Fed Chairman added that the central bank could find itself in a difficult situation if the Fed's objectives regarding inflation and the labor market conflict.

He said, "If that happens, we will consider how far the economy is from each goal and the potential time horizon for closing those gaps."

The Fed Chairman stated that the implications of the US administration's policy are likely to push the Fed further away from achieving its goals.

He noted that the current layoffs of many federal government employees are not at a pace that could have a tangible impact on the US economy yet.

Powell expressed the Fed's readiness to provide dollars to global central banks if necessary.