Federal Reserve Chair Jerome Powell spoke today at the Economic Club of Chicago, addressing the economic outlook amidst escalating trade tensions and new tariff policies. With the U.S. imposing 245% tariffs on Chinese imports and reports of further global trade negotiations, the economic repercussions are rippling across financial markets. As inflationary pressures loom, Powell’s insights are critical in shaping expectations for the Fed’s next steps.
Jerome Powell’s Opening Speech
Federal Reserve Chair Jerome Powell spoke today at the Economic Club of Chicago, addressing the economic outlook amidst escalating trade tensions and new tariff policies. With the U.S. imposing 245% tariffs on Chinese imports and reports of further global trade negotiations, the economic repercussions are rippling across financial markets. As inflationary pressures loom, Powell’s insights are critical in shaping expectations for the Fed’s next steps.
Powell remarked that the labor market remains in solid condition, despite the economic challenges of late. However, he acknowledged the uncertainty surrounding the economic impact of the new administration’s substantial policy changes in four key areas: trade, immigration, fiscal policy, and regulation.
“These policies are still evolving, and their effects on the economy remain highly uncertain,” Powell remarked. He emphasized that the announced tariff increases are significantly larger than anticipated, with economic effects likely to include higher inflation and slower growth.
Powell highlighted that both survey-based and market-based measures of near-term inflation expectations have risen significantly, with many survey participants attributing this to the tariffs. He warned that tariffs are “highly likely to generate, at least temporarily, a rise in inflation,” while also cautioning that these inflationary effects could become more persistent depending on their scale.
“Our obligation is to keep longer-term inflation expectations well anchored,” Powell stated, adding that the Federal Reserve is committed to ensuring that a one-time increase in the price level does not evolve into an ongoing inflation problem.
For now, Powell indicated that the Federal Reserve is well-positioned to wait for greater clarity before making any adjustments to its policy stance. “We continue to analyze the incoming data, the evolving outlook, and the balance of risks,” he said.
He concluded by acknowledging the real-world impact of economic challenges, stating, “We understand that elevated levels of unemployment or inflation can be damaging to and painful for communities, families, and businesses.”
