Fed Chairman Powell painted a disaster scenario for the economy.

05.04.2025 09:20

The President of the U.S. Federal Reserve, Jerome Powell, spoke about additional tariff decisions. Evaluating the effects and consequences of these decisions on the economy, Powell stated, "It will likely raise inflation in the coming quarters." Emphasizing that there could be unpredictable shocks in the economy, Powell's words, "We are facing a highly uncertain outlook with increased risks," raised concerns.

Here is the translated HTML content with the text and the `title` and `alt` attributes of the `img` tags translated into English, while preserving the original HTML structure:



```html

Donald Trump instructed the central bank president to lower interest rates. However, immediately following this instruction, Federal Reserve (Fed) Chairman Jerome Powell explained that the incoming data indicated solid growth, a balanced labor market, and inflation still above the bank's target, despite being much closer to the 2% target. Fed Chairman Powell stated, "Looking ahead, high tariffs will show their effects in our economy and are likely to raise inflation in the coming quarters."

"IT'S STILL TOO EARLY"

Reflecting this, Powell noted that both survey and market-based measures of short-term inflation expectations have moved upward, and according to most measures, long-term inflation expectations remain well anchored and continue to align with the 2% target.

Powell emphasized that the determination to sustainably return inflation to the 2% target remains. He stated that they will continue to carefully monitor incoming data, the evolving outlook, and the risk balance, and that they are well positioned to wait for more clarity before considering any adjustments to the policy stance. Powell remarked, "It is still too early to say what the appropriate path for monetary policy will be."

"LIMITED TANGIBLE DATA IS CONSISTENT WITH A SLOWER BUT STILL SOLID GROWTH OUTLOOK"

After several years of strong growth, Powell noted that many forecasters expect growth to slow somewhat this year, stating that limited tangible data is consistent with a slower but still solid growth outlook. Powell also mentioned that surveys conducted with households and businesses indicated that expectations have diminished and uncertainty regarding the outlook has increased.

Powell pointed out that survey participants specifically indicated the effects of new trade-related policies, expressing that they are closely monitoring the tension between tangible data and soft data obtained from surveys. Powell stated, "As new policies and their potential economic effects become clearer, we will better understand their impacts on the economy and monetary policy."

"WE ARE FACING A QUITE UNCERTAIN OUTLOOK WITH INCREASED RISKS"

Looking at many indicators, Powell noted that the labor market is generally balanced and that there is no significant source of inflationary pressure. He conveyed that the employment report released today shows that the unemployment rate in March remains low at 4.2%, still at low levels since the beginning of last year, and that the combination of low layoffs, moderate employment growth, and slowing labor force growth has kept the unemployment rate generally stable. Fed Chairman Powell stated, "Returning to monetary policy, we are facing a quite uncertain outlook with increased risks of both higher unemployment and higher inflation."

Powell indicated that the new administration in the U.S. is in the process of implementing significant policy changes in trade, immigration, fiscal policy, and regulation, stating, "Our monetary policy stance is well positioned to deal with the risks and uncertainties we face as we better understand policy changes and their potential effects on the economy." Powell noted that it is not their job to comment on policies, but rather to assess their potential effects, observe the behavior of the economy, and set monetary policy to best achieve the bank's targets.

"IT IS BECOMING CLEAR THAT TARIFF INCREASES WILL BE SIGNIFICANTLY LARGER THAN EXPECTED"

Recalling that it will be very difficult to assess the potential economic effects of high tariffs until more certainty is provided regarding details such as what will be subject to tariffs, at what level, and for how long, and the extent of retaliatory measures from trading partners, Powell stated, "Although uncertainty remains high, it is becoming clear that tariff increases will be significantly larger than expected." Powell added, "The same will apply to economic effects such as higher inflation and slower growth."

Powell noted that the magnitude and duration of the effects remain uncertain, stating, "While it is highly likely that tariffs will create at least a temporary rise in inflation, it is also possible that the effects could be more permanent." He expressed that avoiding this outcome will depend on long-term inflation expectations being well anchored, the magnitude of the effects, and how long it takes for the effects to fully reflect in prices, stating that their obligations are to anchor long-term inflation expectations well and to ensure that a one-time increase in price levels does not turn into a persistent inflation problem.

"WE ARE NOT MAKING A FORECAST ON THE LIKELIHOOD OF RECESSION"

Powell stated that the data still indicate a solid economy, with the unemployment rate remaining low and employment close to maximum levels. He emphasized that the Fed is not making a forecast on how likely a recession is, noting, "Many forecasters outside are doing this, and many have raised the probability, even if it is very low." Powell pointed out that they do not want to be part of political debates, stating, "We are not responsible for trade and immigration policy, or fiscal policy."

"UNFORESEEABLE SHOCKS MAY OCCUR"

Fed Chairman Powell stated that they should not be players in areas where they are not responsible to maintain the independence of the Fed. Emphasizing that there could be unforeseeable shocks in the economy, Powell said, "Our job is to use our tools to bring the economy back to price stability and maximum employment, no matter what happens." In response to a question about whether his job is secure, Powell answered that he intends to serve throughout his entire term.