Fed Chair Powell Confirms Interest Rates Hold Amid Uncertain Economic Climate

NEW YORK (AP) — Federal Reserve Chair Jerome Powell reaffirmed on Friday that interest rates will likely remain unchanged for the foreseeable future as the economy navigates significant uncertainty stemming from the Trump administration’s trade policies. Speaking at the University of Chicago’s Booth School of Business, Powell emphasized the importance of waiting for more clarity before making any monetary policy adjustments.

“While there have been recent developments in areas like trade, uncertainty around the changes and their likely effects remains high,” said Powell. “We do not need to be in a hurry, and are well-positioned to wait for greater clarity.”

Economists are divided on the potential impact of the Trump administration’s plans to impose tariffs on a range of imports. While some believe that these tariffs, including a proposed 25% duty on goods from Canada and Mexico, could lead to higher prices for consumers and slow economic growth, others suggest that tax cuts and deregulation might boost the economy.

“Most economists anticipate that Trump’s tariffs could push up prices,” noted Powell. “However, we are also seeing expectations of tax cuts that could promote growth.”

In his address, Powell confirmed that the Fed is closely monitoring economic indicators but is currently not signaling any imminent rate cuts. “Our focus will be on parsing incoming information and separating the signal from the noise,” he added. “Recent reports on the U.S. economy have been weaker than anticipated, but we are prepared to act if needed.”

Market reactions to Powell’s comments reflected a cautious approach, with Treasury yields rising as traders recalibrated their expectations regarding potential interest rate cuts. The Fed’s recent Beige Book revealed that uncertainty among businesses has markedly increased, signaling that economic perspectives are shifting.

“The economic outlook remains mostly positive,” Powell remarked, referencing the strong job market despite recent job report figures that showed a slight uptick in the unemployment rate to 4.1%.

Powell’s comments also addressed concerns about tariffs potentially leading to one-time price increases rather than ongoing inflation. “It’s important to consider how long tariffs might be in place and their broader impact. We need to evaluate long-term inflation expectations,” he stated.

In response to inflationary pressures, Powell acknowledged that consumer sentiment had fluctuated, complicating the Fed’s ability to gauge future spending behavior. “Surveys of consumers and businesses indicate a great deal of uncertainty about the economic outlook,” he said.

Looking forward, Powell emphasized that the Fed must remain cautious. “If tariffs lead to increased costs, we have to consider the potential consequences on inflation expectations and consumer behavior,” he warned. “Economic health depends on both the interplay of various policies and the overall economic indicators.”

St. Louis Fed President Alberto Musalem chimed in, suggesting that while the economy may continue expanding, officials need to prepare for varied scenarios. “We must consider potential challenges, including scenarios where inflation remains above target,” he stressed.

Ultimately, Powell reiterated a central theme of flexibility in policy-making, suggesting that the Fed will maintain a vigilant approach as they navigate unpredictable economic waters. “Our goal is to sustain a balanced and healthy economy, and we’ll adapt as more information becomes available,” he concluded.