Powell indicates tariffs could pose a challenge for the Fed between controlling inflation and boosting growth

Jerome Powell, the Chair of the U.S. Federal Reserve, addressed concerns during a press conference regarding the challenge of balancing inflation control and economic growth. Powell highlighted that uncertainties surrounding President Donald Trump’s tariffs could lead to higher inflation and lower growth, potentially creating tension in achieving the Fed’s dual-mandate goals of maintaining stable prices and full employment. Powell emphasized the importance of managing inflation expectations and stated that tariffs were likely to impact the economy throughout the year. While Powell did not provide specific guidance on interest rates, he mentioned that the Fed would wait for more clarity before considering any policy adjustments. Market reactions were observed with stocks declining and Treasury yields decreasing during Powell’s speech. The Fed is expected to reduce interest rates in the coming months, with the possibility of multiple cuts by the end of 2025. Powell also noted the impact of tariffs on inflation and highlighted the need to keep longer-term inflation expectations stable. In addition, he discussed the anticipated slow growth in the U.S. economy for the first quarter of the year. Retail sales data and strong consumer spending were reported, reflecting the impact of tariffs on various sectors. Despite the expected growth slowdown, Powell described the economy as being in a solid position.