Fed Chair Powell on Economic Outlook, Inflation, and Tariffs

US Economy and Labor Market

• 💡 The US economy remains in a solid position despite heightened uncertainty and downside risks.
• 🎯 The labor market is at or near maximum employment, with non-farm payrolls averaging 150,000 jobs per month in the first quarter.
• 📈 Wage growth has continued to moderate while still outpacing inflation, indicating a broadly balanced labor market.

Inflation Status and Objectives

• 📉 Inflation has significantly eased from its pandemic highs but is still running above the 2% objective.
• 📊 Recent data shows total PCE prices rose 2.3% and core prices rose 2.6% over the 12 months ending in March.
• ⚠️ Recent readings remain above the 2% objective, and progress on inflation continues at a gradual pace.

Impact of New Administration Policies

• 🔍 The new administration is implementing substantial policy changes in trade, immigration, fiscal policy, and regulation.
• ⚠️ Tariffs announced so far are significantly larger than anticipated, with higher inflation and slower growth expected as a result.
• 📈 Both survey and market-based measures of near-term inflation expectations have moved up, with survey participants pointing to tariffs.

Monetary Policy and Future Outlook

• ⚖️ Tariffs are highly likely to generate at least a temporary rise in inflation, potentially becoming more persistent.
• 🧩 Avoiding persistent inflation depends on the size of tariff effects, pass-through time, and keeping longer-term inflation expectations well anchored.
• ⏳ The Fed is well-positioned to wait for greater clarity before considering any adjustments to its policy stance, balancing its dual mandate goals.
• ✅ The Fed remains committed to achieving its goals of maximum employment and price stability.