Washington
Cnn
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Inflation is likely to resume due to President Donald Trump’s radical rates, and could remain high, said the president of the Federal Reserve Jerome Powell on Friday.
“We are faced with a very uncertain perspective with high risks of higher unemployment and higher inflation,” he said at an event just outside Washington, DC. “Although prices are very likely to generate at least a temporary increase in inflation, it is also possible that the effects can be more persistent.”
Powell’s latest comments, his most alive on this subject, come only a few days after the Trump administration has unveiled the highest climbing of American prices on data dating back 200 years, said Fitch Ratings at CNN – even steeper than the extended prices deployed in the 1930 Smoot -Hawley Act. even higher prices for April 9.
Trump’s prices were worse than fearing, triggering a world sale on the stock market this week. JPMorgan economists are now seeing the world’s 60% recession ratings if the prices are held in place. Various forecastists provide for consumer prices, especially for cars, to get closer this year.
Trump’s risky bet to rectify commercial imbalances and bring production to the United States could send the economy of “stagflation”, a toxic combination of stagnant economic growth and the increase in unemployment associated with accelerated inflation. The Fed should approach this two -headed beast, just as it did in the 1970s.
“The Fed is in a difficult situation with the accelerating inflation and the economy ready to slow down,” Kathy Bostjancic, chief economist in Nationwide, in an analyst note on Friday.
Shortly before Powell’s speech, Trump in an article on his social media platform called the Fed to reduce loan costs, accusing the Central Bank chief of doing politics.
“It would be an ideal moment for the president of the Fed, Jerome Powell, to reduce interest rates,” wrote Trump.
Fed officials have adopted a detention scheme on interest rates, waiting for inflation to slow down and saw how Trump’s main changes in policy appear in economic data. They are still expecting to reduce rates at some point this year, according to their latest economic projections published last month.
The Fed reduced the rates three times last year on signs that inflation slowed down. But this progress blocked towards the turn of the year, which weakened the file for new drops in rate and finally prompted the Fed to stand up in January. The Fed continued to have stable borrowing costs last month.
Friday, the American labor market remains solid, according to new government data, which means that there is no urgent need for the Fed to relieve the economy by additional cuts.
But the central bank is uncomfortably pending. Trump recently promulgated prices, if they are kept in place, promise to have large -scale effects on the American economy. If these effects are higher inflation and an increase in unemployment, Fed officials will have to make very difficult choices. The central bank is responsible by the congress to maximize employment and stabilize prices.
In such a scenario, Powell said that those responsible “will examine how each of the two variables is of its objective” and how long it would take to repair one or the other.
“There is no doubt that it is a difficult situation,” he said.
Until now, Trump has already set up tasks on metals and cars and doubled the prices on China at 20%, in addition to those implemented during Trump’s first mandate, which will be even higher than 54%. China has already retaliated on Trump’s prices.
School surveys have already captured America’s discomfort with Trump’s radical economic agenda: consumer confidence in March has plunged at its lowest level since January 2021 and the uncertainty of small businesses on the economy increased in February to its second highest level on the data that dates back to 1973.
“If uncertainty persists or worsens, economic activity can be limited,” said Fed vice-president Philip Jefferson on Thursday at an event in Atlanta.
Powell said the high level of uncertainty that has fallen into America’s decision -makers should be “much lower” next year, after all the dust has set up in the massive changes in the Trump administration policy.
“The real effects of policies should then be quite manifested and clear,” he said.
Powell said the best Fed movement in the middle of Trump’s chaos is to keep the rates for longer. Fed officials come together again to define the interest rate policy from May 6 to 7.
“We are going to have to wait and see how it goes,” said Powell.