[Source/Observer Network by Ruan Jiaqi]
Trump has repeatedly urged for interest rate cuts, to which the Fed responded with "not yet the right time." According to reports by the Associated Press and others, on Friday (the 4th), at an event held in Arlington, Virginia, Federal Reserve Chairman Powell stated that considering President Trump's tariff policies "far exceed expectations," and the potential impact on the economy and inflation may be "more enduring," it is "premature" to adjust monetary policy at this time.
In his speech, Powell emphasized that the full impact of tariffs on the economy remains unclear, and the Fed will maintain a wait-and-see attitude until the economic situation becomes clearer. "Including ourselves, many people are waiting and watching. It seems to be the right choice during such periods of uncertainty," he replied during the Q&A session.
The AP pointed out that Powell's remarks suggest that the Fed may continue to keep the benchmark interest rate around 4.3% over the next few months and will not cut rates in the short term.
The New York Times also noted that this approach aligns with the views of Fed Vice Chairman Philip Jefferson and Governor Lisa Cook, who both stated on Thursday that the Fed "does not need to rush to further adjust the policy interest rate" and should "remain patient and meticulous."
Chairman Powell's speech. Photo from the Associated Press video screenshot.
In this speech themed "Economic Outlook," Powell discussed Trump's tariff policies. He warned that new tariff measures could lead to rising unemployment and simultaneously cause inflation to rise and economic growth to slow down in the U.S.
According to the transcript released by the Federal Reserve's official website, Powell stated that the U.S. is facing highly uncertain prospects in monetary policy. The Fed will assess the potential impacts of government policy changes, observe economic behavior, and formulate monetary policy in the way most likely to achieve the Fed's mission goals.
He further stated that it is difficult to evaluate the economic impact of raising tariffs before more clarity on specific details is gained, but it is becoming increasingly clear that the increase in tariffs far exceeds expectations. The economic impact may also be significant, including rising inflation and slowing economic growth. The scale and duration of these impacts remain uncertain.
Powell said that adjusting monetary policy regarding tariffs is "premature," adding that "our obligation is... to ensure that a one-time rise in price levels does not become a persistent inflation problem."
The New York Times noticed that Powell's view of the U.S. economic outlook has become "more pessimistic." The AP also pointed out that Powell's description of the impact of tariffs is more negative than last month when he had described any inflation caused by tariffs as temporary. This statement aligns with Treasury Secretary Janet Yellen's remarks.
Now, although unwilling to reveal whether he believes the U.S. economy is heading toward a recession, Powell admitted that the uncertainty of trade policies is putting pressure on businesses. Additionally, increasing forecasts show that the risk of an economic downturn is continuously rising. He added that despite the current robust performance of the economy and employment, consumers and businesses have become more pessimistic about the future.
The U.S. Congress requires the Fed to ensure employment and price stability, but Powell also acknowledged that tariffs could lead to job losses and price increases, making it harder for the Fed to achieve its two goals.
"There is a contradiction between these two goals, or there might be a contradiction." In the Q&A session, Powell stated that Fed officials can only think about "how far these are from the ultimate goals" and "how long it would take to resolve one of them." He said, "Without a doubt, this is a tricky situation."
The AP analysis suggests that Powell's speech on Friday indicates that if such a conflict arises, he may prioritize focusing on the inflation issue.
CNN pointed out that Trump's risky bet may drive the U.S. economy toward "stagflation." The report defines "stagflation" as a harmful combination of stagnant economic growth, rising unemployment, and accelerating inflation, which the Fed must confront as it did in the 1970s.
However, Julia Coronado, founder of research firm MacroPolicy Perspectives, noted, "The Fed cannot provide the same level of support for the economy as it did during the trade disputes in 2018 and 2019 because inflation is currently too high and exceeds their target range."
She believes that there will be an economic recession in the second half of this year. "Even if they conclude that interest rates need to be lowered, they may lower them later and more slowly due to the inflationary pressures we will face."
Kathy Bostjancic, chief economist at financial institution Nationwide, also wrote in a report on Friday, "Inflation will accelerate, economic growth will slow, and the Fed is in a difficult position."
Shortly before Powell's speech, Trump posted on his self-created social media platform "Truth Social," urging the Fed to cut interest rates again, stating that "now is the perfect time for Powell to announce a rate cut."
Trump, who has been at odds with Powell since his first term, attacked him, saying that Powell should "stop playing politics" and stop being late on cutting interest rates.
Trump previously urged the Fed to cut interest rates multiple times. On March 19, after the two-day monetary policy meeting, the Fed decided to maintain the federal funds rate target range at 4.25% to 4.50%.
This decision drew Trump's dissatisfaction, and he posted on social media on the same day, urging the Fed to cut interest rates because the impact of American tariffs was gradually seeping into the economy. On March 24, Trump once again expressed hope for interest rate cuts.
After Trump announced the so-called "reciprocal tariffs" list on April 2, U.S. stocks were "bloodied" on March 3, with the three major indices experiencing their largest single-day drop in nearly five years. However, he still insisted that despite the market being impacted by tariffs, the stock market would "prosper." Trump also posted comparing the U.S. to a "patient" and the "reciprocal tariffs" to "surgery," claiming that "the surgery is over, and the patient survived."
When asked about these comments on Friday, Powell politely declined to comment, stating that he is not suitable to evaluate the remarks of elected officials but emphasized the Fed's strict and non-political principles. He said, "We try to stay away from the political process. People expect us to tell the truth, and that's what we do."
Powell also revealed that Fed officials will meet again on May 6-7 to formulate interest rate policies. "We need to see how things develop."
This article is an exclusive contribution from the Observer Network and cannot be reprinted without permission.
Original source: https://www.toutiao.com/article/7489694483161072166/
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