FED Chairman Jerome Powell made interesting statements about the US economy in his speech at the Chicago Economic Club, which was held as planned today.
Here’s what Powell said:
- Current policy is well placed and we will await clearer economic data before considering changing the policy stance.
- Despite heightened uncertainty and ongoing downside risks, the U.S. economy remains “strong.”
- Employment is now near its highest level, inflation is just above the 2% target, and inflation has fallen significantly.
- Economic growth in the first quarter of 2025 may slow compared to stable growth last year.
- Strong imports in the first quarter will drag down GDP growth.
- Business and household confidence fell sharply and uncertainty increased, reflecting concerns about trade policy.
- The labor market is robust and broadly balanced, and there is currently no pressure on inflation.
- Personal consumption expenditures (PCE) are expected to grow by 2.3% and core PCE by 2.6% in the 12 months ending in March.
- Government policies are still being adjusted and the associated impacts remain highly uncertain.
- The tariffs, which are much higher than expected so far, could mean higher inflation and slower economic growth.
- The inflationary impact of tariffs may be more persistent and ultimately depends on market inflation expectations.
- Our responsibility is to keep long-term inflation expectations intact.
- We may face a difficult situation where there is a conflict between two goals. In such a case, we will assess how far the economy is from our various goals and the potential timeframe for closing these gaps.
- The impact of policies may cause the Fed to deviate from its intended targets.
- We are expected to deviate from the targets set for the rest of this year, but perhaps we will be able to meet the targets again next year.
- Tariff levels exceed Fed’s optimistic expectations.
- The FED should keep inflation expectations stable;
- The FED’s responsibility is to ensure that inflation expectations do not turn into persistent inflation.
- Automakers’ supply chains could continue to be disrupted in the coming years, potentially leading to persistent inflation.
- The federal government’s reduction in funding for scientific research is expected to have a significant impact on employment.
- Cuts in funding for universities and scientific research are having a significant impact in some cities and could have long-term effects on productivity.
- There is no conflict yet between the Fed’s two goals, but the current trend is for unemployment and inflation levels to rise.
- If uncertainty remains high, the situation will become difficult and will negatively impact investments.
- The market is digesting historically rare events and market volatility is expected to continue as uncertainty remains high.
- We have not yet reached the point where we need to stop reducing our balance sheet size.
- In case of a shortage of US dollars, the Fed is ready to provide US dollars to central banks around the world.
- We need to deal with the debt trend.
(Explanations will be updated as they are added.)
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