The Federal Reserve will wait to see the impact of recent sweeping tariffs on the U.S. economy before considering making policy adjustments, according to Fed Chair Jerome Powell.
Speaking in front of the Economic Club of Chicago, Powell said that the Fed is well-positioned to “wait for greater clarity” before deciding on interest rate changes.
“For the time being, we are well-positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell stated.
The two main goals of the Fed are to keep the prices stable while maximizing employment. It makes changes to its policy based on which goal it needs to achieve. However, the tariffs could jeopardize both goals at the same time, causing inflation to surge while slowing economic growth.
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell added. “If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”
The markets didn’t react positively to Powell’s remarks. The benchmarks S&P 500 slid by 120.93 points or 2.24% while tech-heavy Nasdaq Composite lost 516.01 points or 3.07%. The blue-chip Dow Jones Industrial Average went down by 700 points or 1.73%.