According to the president of the Fed, it is essential to preserve confidence in the direction of monetary policy
The president of the Federal Reserve, warned about the impacts of tariff increases implemented by the government of. According to him, these measures may result in an increase in inflation in the short term, which represents a significant risk to pricing stability. “Short -term inflation expectations have risen. Tariffs are a relevant factor,” he said at a press conference after monetary policy decision. “The effects of tariffs will depend on the level, but increases this year will probably weigh on economic activity and push inflation up.”
Powell warned that these effects can be “more persistent,” and that the Fed’s obligation is to prevent “a punctual price increase from becoming a continuous inflationary problem.” For this, according to him, it is essential to preserve confidence in the direction of monetary policy. “Avoiding persistent inflation ultimately depends on maintaining long -term inflation expectations.”
The president of the Fed acknowledged that inflation “has been running just above the target of 2%” and that “the expectations of inflation have recently rose.” Despite the uncertainties, Powell said the American economy is still solid and that the conditions of the labor market remained firm. “Unemployment has been kept in a narrow and low range, and a large set of indicators is consistent with full employment,” he said. He dismissed salary pressures as a focus of concern: “The job market is not a source of inflationary pressure.”
Powell, however, recognized that the scenario is challenging. “The projections of the Fed policy formulators are subject to uncertainties, which are extraordinarily high at this time.” Still, according to him, “the current posture of monetary policy is well positioned to react.”
Trend for the coming months
The president of the Federal Reserve said that the effects of tariff increases promoted by the US government are already being felt and should intensify in the coming months. The statement was made at a press conference after the monetary policy decision. According to the Fed President, “it takes time for tariffs to reach the end consumer,” but the American BC already observes pressure on the prices of goods and hopes to “see more of it in the summer” of the northern hemisphere.
Powell pointed out that the magnitude and duration of impact are still difficult to estimate. “The size, quantity and duration of tariffs are highly uncertain,” he said. “We are adapting in real time to the estimates of how high these tariffs will be.” Nevertheless, the Fed president said there was progress in fighting inflation, attributing part of this to a slowdown in the housing sector. “We are well positioned, for now, to wait and learn more before considering adjustments in monetary policy,” he said. According to Powell, Fed projections are more reliable in the short term. “It’s hard to make longer -term predictions. The focus should be on the nearest horizon.”
*Report produced with the aid of AI and Estadão Content
Posted by Fernando Dias
