Powell Notes Speech April 4, 2025: Powell think they are in a good positions to wait for greater clarity, and make sure one time price increases does not become a bigger problem
Imo this conference confirms my current thinking that it’s not going to be as easy for the FED to start cutting rates aggressively again as the markets think, and it will really depend if the impact on tariffs starts to be evident in coming data or not.
It does not seem however to be because the FED is focusing more on inflation or not, but mostly because they are currently so uncertain about the ultimate impact on both mandates, that they just don’t know what they should do at the moment.
- Is clear inflation is going to increase and growth is going to be slowing but is still unclear to him what the appropriate path for monetary policy should be
- Powell said the Fed is in a good position to wait for more clarity before adjusting policy. It’s still too early to determine the appropriate course.
- He is focusing on the “highly uncertain outlook to wait because of major policy shifts from the new administration in trade, immigration, fiscal policy, and regulation.
- Tariff increases are expected to be larger than anticipated, likely causing at least a temporary rise in inflation and slower growth, though the size and duration of these effects are still unclear.
- He emphasized the difficulty in assessing the economic impact of tariffs without more clarity on their details.
- The Fed’s priority is to keep long-term inflation expectations anchored and ensure that a one-time price surge doesn’t become persistent inflation.
- According to him we’re not yet in a 1970s-style conflict between the 2 mandates, which is particularly hard for central banks to navigate.
- He acknowledged that external forecasters see a higher risk of recession, though the Fed itself doesn’t assign probabilities.
- Powell also noted frequent contact with other central banks, especially in uncertain times.
