Federal Reserve Chairman Powell stated at the New York Economic Forum last Friday (March 7) that the Trump administration's tariff plan may push up inflation, but its impact remains to be seen. He emphasized that the Federal Reserve does not need to hastily cut interest rates until it has more information, but should maintain a wait-and-see attitude. Powell's remarks highlight the cautious stance of the Federal Reserve in the current complex economic environment, while also providing important clues to the market about the future direction of monetary policy.

The potential impact of tariffs on inflation

Powell pointed out that it remains to be seen whether the Trump administration's tariff plan will trigger sustained inflation. He stated that if tariffs were only a one-time event, the Federal Reserve would not need to respond by tightening monetary policy. However, if tariffs escalate into a series of events and lead to sustained inflation, the Federal Reserve will have to take action. Powell emphasized that the key lies in whether long-term inflation expectations will change and the persistence of inflation effects. He also mentioned that the Federal Reserve needs to comprehensively consider the current economic background, including inflation levels that have not yet fully returned to the 2% target.

Differences between the US Treasury Secretary and the Federal Reserve

US Treasury Secretary Besson believes that tariffs may lead to a one-time price increase, but will not trigger sustained inflation. He suggested that the Federal Reserve should treat tariffs as temporary factors, just like how it treated inflation in 2021. The contrast between Besant's viewpoint and Powell's cautious attitude reflects the potential divergence between the US government and the Federal Reserve on tariff issues. Powell stated that the Federal Reserve will remain cautious and ensure a thorough understanding of the impact of tariffs before making decisions, rather than hastily cutting interest rates.

Economic and Policy Prospects

Powell pointed out that the significant adjustments made by the Trump administration in the areas of trade, immigration, fiscal policy, and regulation have brought great uncertainty. He emphasized that the Federal Reserve is currently in a favorable position and can wait for the situation to become clearer. Although consumer spending may slow down and businesses and companies feel uncertain about the economic outlook, key economic data remains robust. Powell mentioned that the number of US jobs increased by 151000 in February, with an average monthly increase of 191000 jobs since September last year, demonstrating the resilience of the job market. The market expects the Federal Reserve to keep interest rates unchanged at its March policy meeting and closely monitor the latest economic forecasts to assess the impact of the Trump administration's policies on inflation, employment, and growth.

summarize

Powell's speech indicates that the Federal Reserve has adopted a "static brake" strategy on tariffs and inflation issues, emphasizing that there is no need to hastily cut interest rates before obtaining more information. Although tariffs may push up inflation, their impact is still unclear, and the Federal Reserve will maintain a wait-and-see attitude. At the same time, the optimistic view of US Treasury Secretary Besson contrasts with the cautious stance of the Federal Reserve, highlighting the differences among policy makers. In the future, with the implementation of tariff policies and further clarification of economic data, the decisions of the Federal Reserve will continue to be the focus of market attention.