Summary
Fed Chair Jerome Powell warned that Trump’s new tariffs will likely raise inflation and slow growth, creating a “highly uncertain outlook.”
Speaking in Arlington, Va., Powell said the Fed will hold off on interest rate moves until the effects are clearer.
While Trump pushes for rate cuts, Powell stressed the need to keep inflation expectations anchored.
Powell acknowledged current economic strength but cited growing consumer anxiety and elevated 2.8% core inflation.
I actually watched the speech and one bit I found to be quite interesting is that he said if the two sides of the Mandate conflict they will deal with the side that is out of whack the most. So if unemployment were to massively increase, they would cut interest rates and accept a slightly higher inflation to bring the unemployment down. And if inflation went crazy and the jobs market was only slightly affected, they would raise interest rates until the inflation came back down.
That seems reasonable. It’s also possible for both high inflation and high unemployment. In that case he’d be like ¯\_(ツ)_/¯
Based on his comment yesterday, he would find out which one is moving faster in the wrong direction and be more aggressive on that side of the mandate. If they are both rising, but one is rising faster than the other, then he would focus on that side first.
