We are fed in guard-and-see mode; Uncertainty about Trump tariffs could do lasting economic damage, says Jerome Powell | Mint

Jerome Powell, chairman of the US Federal Reserve, said on Wednesday that the central bank would remain patient and wait for more clarity on the economic outlook before considering any changes to interest rates, Reuters reported. Powell spoke at the Economic Club of Chicago and also warned that President Donald Trump’s tariff policy could further renounce inflation and employment of the Fed’s mandate targets. “For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy attitude,” Jerome Powell said. Powell highlights the risk of a complicated scenario in which rates increase consumer prices, while at the same time dampening economic growth and may weaken the labor market. This, he warned, could lead to inflation and employment that further deviated from the Fed’s goals, Reuters reported. “I do think that we will move away from these goals, probably for the balance of this year. Or at least make no progress, due to the impact of rates that have been greater than even the most serious scenarios in Fed planning estimates,” Powell said. Powell noted that they describe the tariff plans of the administration as ‘fundamental changes’, that they offer little historical precedent for businesses or economists to model, Reuters reports. “These are very fundamental policy changes. There is no modern experience of how to think about this,” Powell said. He added that the US started this year close to full employment, with inflation expected to alleviate the Fed’s 2% goal – a result that seemed unlikely to many observers. Powell said “the level of tariff increases announced so far is significantly greater than expected” and that the prolonged uncertainty around tariffs could do lasting economic damage. With Trump’s rates that place the economy on a path to weaker growth, higher unemployment and faster inflation – all at the same time – the Fed also stands in the face it did not handle in about half a century. Prospects on Powell markets attribute the recent market volatility to a rational adjustment to the Trump administration’s sudden shifts in the trade policy, rather than a sign of financial instability that justifies the central bank intervention. He said he felt that mortgage and stock markets were functioning well, showing that investors adapted to the new policy landscape. In response to a question about the existence of a so-called “Fed Put”-the idea that the central bank would intervene to support markets in the event of a sharp downturn-Powell rejected the idea. “Markets are struggling with a lot of uncertainty, and that means volatility,” he said. “But that said, markets function … they are orderly and they function just as you would expect them to function.” (With input of Reuters) Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, and not of currency. We advise investors to check with certified experts before making investment decisions. First published: 17 Apr 2025, 05:46 AM IST