Powell sees prices increase inflation and says that the Fed will wait before new rate movements

The president of the federal reserve, Jerome Powell, said on Friday that he expects the prices of President Donald Trump to increase inflation and growth, and indicated that the central bank will not move until it does not have a clearer image on the ultimate impacts.

In a speech delivered to business journalists in Arlington, Virginia, Powell said the Fed faced a “very uncertain perspective” due to the new reciprocal samples that the president announced on Wednesday.

Although he said that the economy was currently strong, he stressed the threat that the prices pose and said the Fed will focus on defeating inflation.

“Our obligation is to maintain the long -term inflation expectations well anchored and to ensure that an ad hoc increase in the price level does not become a problem of inflation in progress,” said Powell in prepared remarks. “We are well placed to wait for greater clarity before considering any adjustment to our political position. It is too early to say what will be the appropriate path for monetary policy.”

The remarks occurred shortly after Trump called Powell to “stop doing the policy” and reducing interest rates because inflation is down.

There was a torrent of sale at Wall Street after the announcement of Trump of 10% of prices between the edges, as well as a menu of reciprocal costs which are much higher for many key business partners.

Powell noted that the prices announced were “much greater than expected”.

“The same goes for economic effects, which will include higher inflation and slower growth,” he said. “The size and duration of these effects remain uncertain.”

While Powell was circumspect on how the Fed will react to changes, the markets tariff an aggressive set of interest rate drops from June, with an increasing probability that the central bank cuts at least a complete percentage of its key borrowing rate by the end of the year, according to data from the CME group.

However, the Fed is responsible for maintaining the inflation anchored with full employment.

Powell stressed that the inflation meeting of his mandate will need to keep the expectations of inflation under control, which may not be easy to do with Trump Lobbing prices among American business partners, some of which have already announced reprisal measures.

An emphasis on inflation would also be likely to dissuade the Fed from softening it to policy until it assesses the prices for the prices. As a rule, decision -makers consider prices as a simple temporary increase in prices and not as a fundamental inflation engine, but the general nature of Trump’s decision could change this perspective.

“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,” said Powell. “Avoiding this result would depend on the maintenance of the long -term inflation expectations well anchored, the size of the effects and the duration of the duration so that they go to prices.”

Central inflation operated at an annual rate of 2.8% in February, part of a general moderation model which is nevertheless still much higher than the 2% target of the Fed.

Despite the high anxiety on prices, Powell has said that the economy for the moment “is still in the right place”, with a solid labor market. However, he mentioned recent consumer surveys showing increasing concerns about inflation and expectations of future growth fat, stressing that longer -term inflation expectations are always in line with the Fed objectives.

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