The chairman of the Jerome Powell federal reserve system said he would expect to see the impact of tariffs on inflation data in the coming months.
Despite this, he acknowledged significant uncertainties surrounding the exact timing and size of these effects.
We fed in a difficult position
“We are watching. We expect to see a few higher reading during the summer,” Powell said on Tuesday.
Powell spoke on the annual European Central Bank forum about central banking in Portugal Sintra, moderated by Bloomberg.
Nevertheless, he added that politicians are ready to find out that the impact could be “higher or lower or later or later than we expected”.
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The US Central Bank is currently struggling with unpleasant tension between its forecasts and recent data.
Why Fed is waiting for cuts cuts?
This year, the Fed detained interest rates, although he faced the intense pressure of President Donald Trump.
The key reason for this delay is to assess whether the price -based price increases will lead to persistent inflation. But the price increase is not yet displayed.
Powell reiterated that without the widespread use of Trump tariffs, the Fed would probably reduce the rates this year.
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“In fact, we paused when we saw the size of the tariffs, and basically all the inflation forecasts for the United States for the United States subsequently rose due to tariffs,” Powell said.
“We think the cautious thing is to wait and learn more and find out what these effects could be,” he added.
Reducing the rate in July has not been decided
Asked if July was too early to reduce rates, Powell did not rule out the possibility.
“We are going to meet with a meeting,” he stressed, saying that any decision would depend on how the data evolves.
Another federal meeting of the open market committee is 29-30. July in Washington.
Divided views in the Fed
Politicians in June unanimously voted to hold stable rates again. However, updated quarterly screenings revealed the division between Fed officials regarding the future rate trip.
While 10 politicians expect at least two cuts this year, in 2025 there were no cuts and two more predicted only one reduction before the end of the year.
The tariff impact is still unclear
Trump’s deposit of new tariffs on dozens of US business partners, along with its frequent fluctuations in the specifics of duties and stopping progress in striking commercial agreements, led to uncertainty in economic outlook, the press agency reported.
Prognostics broadly expect tariffs to exert pressure on inflation and suppress economic growth. However, economic data have shown a small impact on prices or labor market.
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“We have always said that the timing, quantity and persistence of inflation would be very uncertain,” Powell said on Tuesday.
Two Fed Governors, who appointed Trump, Christopher Waller and Michelle Bowman, claimed that the reduction in rates could be appropriate as soon as the Fed meets at the end of this month, and as one of the factors they quote benign economic data.
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