Jerome Powell Says Economy in Strong Shape:n a highly anticipated press conference, Federal Reserve Chair Jerome Powell shared an optimistic outlook on the U.S. economy while cautioning about potential inflationary pressures due to new tariffs. Powell explained why the Fed is adopting a wait-and-watch approach before cutting interest rates, emphasizing forward-looking policy and evolving business sentiment.
Jerome Powell Says Economy in Strong Shape
In a closely watched press conference, Federal Reserve Chair Jerome Powell provided critical insights into the current state of the U.S. economy, inflation dynamics, and the Fed’s approach to interest rates in the coming months. Powell’s remarks offered a nuanced look at how the central bank is balancing strong economic indicators with emerging risks, particularly those associated with new tariffs.
Powell emphasized that the U.S. economy remains on solid footing. He pointed out that inflation has come down over the past three months, real wages are rising, and the unemployment rate stands at a relatively low 4.2%. Job creation remains healthy, and labor force participation is strong. According to Powell, “The US economy is in solid shape. Inflation has come down. The unemployment rate remains at 4.2%. Real wages are moving up. Job creation is at a healthy level. Labor force participation is in a good place.”
However, Powell acknowledged that there is significant uncertainty ahead, particularly regarding the impact of newly implemented tariffs. These tariffs, he explained, will likely lead to higher inflation in the months to come as businesses and consumers adjust to the added costs. “Every forecaster I know is forecasting a meaningful increase in inflation in coming months from tariffs,”
Powell stated. He elaborated that the cost burden from tariffs will ultimately filter through the supply chain, from manufacturers to exporters, importers, retailers, and finally to consumers. “Someone has to pay for the tariffs, and some of it will fall on the end consumer,” Powell noted, citing both business feedback and historical data.
When asked if Americans should brace for economic pain in the second half of the year, Powell was careful in his response. “I’m not not not saying that at all,” he clarified, reinforcing that while there are risks, the economy currently shows strong fundamentals.
Powell also addressed the Fed’s approach to interest rates and its reliance on data-driven decision making. He reaffirmed that monetary policy must be forward-looking, citing the example of the Fed’s rapid rate cuts at the onset of the pandemic, which were based on anticipated economic fallout rather than current data at the time. “Monetary policy has to be forward looking. That is elementary,” Powell said. “We always talk about the incoming data, the evolving outlook and the balance of risks.”
Despite the progress on inflation and robust economic indicators, Powell made it clear that the Fed is not yet ready to cut rates. The central bank wants to observe how tariff-related inflation unfolds before making any premature policy adjustments. “We just want to see a little bit of that before we make judgments prematurely,” Powell emphasized.
Business sentiment, which took a hit after April 2nd, has shown signs of recovery. Powell noted that businesses have begun to adapt to the new circumstances and are more optimistic than they were a few months ago. “You see business sentiment. You talk to business people. Now there’s a very different feeling now that people are working their way through this and they understand how they’re going to go. It feels much more positive and constructive than it did three months ago,” he concluded.
Powell’s remarks highlight the Fed’s cautious yet optimistic stance: while the economy is performing well, uncertainties like the impact of tariffs on inflation warrant careful monitoring before any major shifts in monetary policy.
Disclaimer:
This article is for informational purposes only and reflects the views expressed by Federal Reserve Chair Jerome Powell during his recent press conference. It should not be considered as financial advice or investment recommendation. Readers are encouraged to conduct their own research or consult with a financial advisor before making any financial decisions.