During his speech at the Economic Club of Chicago, Federal Reserve Chair Jerome Powell expressed serious concerns about the impact of new tariffs on the U.S. economy, emphasizing the need for caution.
Threats to the U.S. Economy
Powell stated that new tariffs could heighten inflationary pressures, which would slow economic growth. He pointed out that such a situation could lead to stagflation, raising concerns among monetary authorities.
Key points from his speech include:
* Potential rise in inflation: tariffs could quickly pass through to consumer prices; * Slowing growth: supply chain disruptions could weigh on economic activity; * Complication of the Fed’s mandate: balancing support for employment and fighting inflation would become more difficult; * Need for caution: the Fed will take a wait-and-see approach until effects are precisely measurable.
Monetary Policy and Uncertainty
The dilemma facing the Fed goes beyond a simple reading of economic data. Powell acknowledged that maintaining price stability could face unexpected obstacles, particularly due to market volatility caused by trade tensions.
"We must be ready to react if inflationary momentum strengthens in a slowed growth environment," he said, indicating the Fed's willingness to adopt a cautious policy adjusted over the coming months.
Markets React to Powell's Speech
Financial markets quickly reacted to these signals. Following the speech, major U.S. stock indices showed a marked decline as investors anticipated a more cautious, even indecisive, Fed stance in the coming months. The prospect of increased tariffs also raises concerns about corporate and household morale, which could further slow investment and consumption.
Powell's words highlight the importance of closely monitoring the economic situation and the potential implications of trade uncertainty on future monetary policy.
