Federal Reserve Chairman Jerome Powell
Federal Reserve Chairman Jerome Powell said that the US inflation has declined remarkably since mid-2022, but is still slightly above the 2% target, and that this requires a focus on the central bank’s dual mandate.
In a speech prepared to be delivered on Tuesday to the Committee on Financial Services, Powell said that, despite elevated uncertainty, the world’s largest economy is in a solid position, as the unemployment rate remains low, and the labor market is at or near maximum employment.
He added that the Federal Reserve remains squarely focused on achieving its dual-mandate goals of maximum employment and stable prices for the benefit of the American people.
Incoming data suggests that the economy remains solid, although GDP has been difficult to measure recently due to the volatility of imports before the tariffs took effect, he added.
Powell also noted that the effects of the tariffs will depend mainly on their ultimate levels, and that the expected effects peaked in April, but have since declined.
Nonetheless, Powell suggested that this year’s tariff increases will likely push up prices and weigh on economic activity.
The effects on inflation could be short lived—reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored, according to Powell.
Federal Reserve Chairman Jerome Powell
Federal Reserve Chairman Jerome Powell said that the US inflation has declined remarkably since mid-2022, but is still slightly above the 2% target, and that this requires a focus on the central bank’s dual mandate.
In a speech prepared to be delivered on Tuesday to the Committee on Financial Services, Powell said that, despite elevated uncertainty, the world’s largest economy is in a solid position, as the unemployment rate remains low, and the labor market is at or near maximum employment.
He added that the Federal Reserve remains squarely focused on achieving its dual-mandate goals of maximum employment and stable prices for the benefit of the American people.
Incoming data suggests that the economy remains solid, although GDP has been difficult to measure recently due to the volatility of imports before the tariffs took effect, he added.
Powell also noted that the effects of the tariffs will depend mainly on their ultimate levels, and that the expected effects peaked in April, but have since declined.
Nonetheless, Powell suggested that this year’s tariff increases will likely push up prices and weigh on economic activity.
The effects on inflation could be short lived—reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored, according to Powell.
