Jerome Powell on Tariffs' Impact on Inflation and Economy

Tariffs and Goods Prices

• 💡 Most of the overrun in goods prices is attributed to tariffs, which is viewed as good news as it's not demand-driven.
• 📌 Tariffs are expected to cause a one-time price increase and then begin to subside.
• 📈 Core PCE inflation is running slightly above 2% when the effects of tariffs on goods are excluded.

Services Inflation and Economic Outlook

• ✨ A healthy development is the ongoing disinflation in services across all categories.
• ⚠️ The expectation is that tariff effects on goods prices will peak and then decline, assuming no new major tariff increases.
• 🎯 If these disinflationary trends continue and downside risks in the labor market do not reemerge, the Federal Reserve may consider loosening policy.

Transition and Policy Considerations

• 🔑 The Federal Reserve operates with a two-sided mandate, considering both price stability and maximum employment.
• 💬 Regarding potential changes in Fed Chair, Powell stated he has nothing to offer and cannot speculate on such matters.