Federal Reserve Chair Jerome Powell addressed concerns over the U.S. economy on Friday, stressing that the central bank is not rushing to cut interest rates. Speaking in New York, Powell highlighted the ongoing policy uncertainties that continue to cloud economic forecasts.
“As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves,” Powell remarked. He reiterated that there is no immediate need for action, stating, “We do not need to be in a hurry and are well-positioned to wait for greater clarity.”
In a Q&A session following his speech, Powell noted that the current economic environment allows for caution. “The cost of being cautious is very, very low. The economy is fine. It doesn’t need us to do anything, really, so we can wait and we should wait,” he added.
Powell’s comments come in the wake of February’s jobs report, which indicated a stronger-than-expected addition of 151,000 jobs, surpassing January’s figures of 125,000. Despite this positive news, the unemployment rate ticked up slightly from 4% to 4.1%. Powell remarked, “Many indicators show that the labor market is solid and broadly in balance,” emphasizing the average addition of 191,000 jobs per month since September.
While markets are pricing in three interest rate cuts following the jobs report, Powell continued to emphasize the uncertainties stemming from policies enacted by the Trump administration. He pointed out that these uncertainties are not limited to tariffs but extend to immigration, regulation, and fiscal policy changes.
“The new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation,” Powell explained. He noted that the cumulative effects of these changes will be crucial for both the economy and monetary policy.
Powell clarified that a temporary spike in prices due to tariffs would not necessitate a tightening of monetary policy, as such actions could hinder employment and economic activity unnecessarily. However, he acknowledged that economists are forecasting potential inflationary impacts from tariffs that could affect various sectors, including exporters, importers, retailers, and consumers.
As the Fed navigates these complex dynamics, Powell’s emphasis on patience suggests a measured approach to future monetary policy adjustments.
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