Tariffs-induced inflation may delay Fed’s mission, says Powell

Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell affirmed that the US economy remains strong, but acknowledged some signs of weakness among consumers.

He warned of a delay in containing inflation due to the US administration's trade policies.

Speaking at a press conference, Powell said the recent indications point to a moderation in consumer spending after rapid growth during the second half of 2024.

“We don't mind keeping interest rates high if the economy remains strong,” he said.

The Fed chairman said that policy could be eased if the labor market weakens unexpectedly or inflation declines more rapidly than expected.

Washington's policies will impact the economy and monetary policy, he said, adding that tariff-induced inflation may delay the Fed's mission.

“ We expect inflation to decline over the next two years. However, the outlook remains uncertain,” Powell said.

The current official data is strong, he said, despite the survey data showing increased uncertainty and concerns.

“We will wait until the economic situation becomes clearer. We will separate tariff-related inflation forecasts from other forecasts.”

Independent expectations of recession have risen, Powell said, adding that these expectations remain relatively moderate.

However, there is always an unconditional probability of a recession occurring, which is a 1:4 probability, the Fed chairman said.