Jerome Powell’s design to ensure any leap in the prices of Donald Trump’s tariff does not spread through the economy, earning him the title of “Al -Sayyid is too late” from the president. For the Federal Reserve Chair, this is better than being a mistake.
Just a few months ago, Powell was directing his colleagues and the economy towards the so -called soft landing, a scenario in which inflation and interest rates slide while unemployment remains low. Trump’s comprehensive definitions raised the outlook, raising expectations for weaker economic growth and high inflation this year.
This has prompted federal reserve officials to convert their strategy into a strategy that may be described in the best way as planning to a late rescue of the economy – keeping fixed rates for a long time to maintain the containment of inflation, but be ready to reduce it in time only to maintain the labor market.
“They prefer to be late,” said Aditya Bahf, senior American economists at Bofa Securities. “You will wait and see how things play on both arrivals.”
Federal reserve officials are expected to leave unchanged prices when they meet at their two -day meeting from May 6 to 7 in Washington.
In recent weeks, Powell and his colleaguesto cautionThe inflationary effect of the president’s import duties may be more stable than expected, and stressed that the task of the Federal Reserve is to ensure that any receipt in prices is limited. This means maintaining a narrow position on interest rates to maintain expectations about prices under control, and retainFixed ratesIn the absence of a significant rise in unemployment.
“Our commitment is to maintain long -term inflation expectations, and to ensure that the increase once in the price level does not become a problem with continuous inflation,” Powell at the Chicago Economic Club said on April 16.
These notes prompted quick criticism from the White House, with TrumpUrgingPowell to reduce interest rates now to ignore the economic slowdown.
Waiting with the risks comes: Once the unemployment rate begins to rise, it usually moves quickly and the economy is designed to stagnate. But very soon reduction in interest rates can allow prices to build again, which officials do not want to do after increasing inflation after birth.
Some federal reserve monitors say that the late rescue process can be the final test of Powell Powell policy, economic and timing.
“This is a new test for him,” said Claudia Siham, New Century Advisors. “You have both sides of the mandate out of the path in a way that they will have to choose.”
Personality
Security has become a soft drop after an explosion of inflation after childbirth has become a personal task for a Powell. He called the peak of the shooting cycle at the Federal Reserve in December 2023, after it was cooled, but the expansion was not destroyed. The inflation at the time was less than a percentage higher than the Federal Reserve’s goal by 2 %, a decrease of four decades by 7.2 % in 2022.
When it is time to cut prices in September, PowellconvincedHis colleagues in the Federal Open Market Committee to join him in reducing half an aggressive point to maintain a strong labor market. They ended up reducing the percentage rates on three meetings before this year, as inflation began to settle for their goal.
Trump had regained the White House by that time, and at the Federal Reserve meeting, it was clear that the threat of definitions would keep the prices high – leading officials to signal Top inflation expectations and slower growth.
Trump’s tariff plans have reached a sensitive time, as the previous five readings come about amazingly hot inflation. The preferred measurement measurement of the Federal Reserve reached the basic inflation by 2.8 % in February, and economists expect to decrease to 2.6 % in March – still above the central bank’s goal.
“The chief economist in Stifel Financial Corp. “I am concerned about the stability of inflation with or without definitions. We are at risk.”
These fears extend beyond Federal Reserve Observer. Consumer enlargement expectations Rise In April, according to a previous report on Friday from the University of Michigan, the economists of Bloomberg claim this month that the trade war makes the possibility of American recession a Flip’s currency.
It would undoubtedly cause a more doubt about the White House. Trump is alreadyGlimpsePowell, though thisI retreated awayFrom the threat when she collected financial markets.
But the central bank, which fails to control inflation after it was higher than the target for a four -year -old, can, in fact, lose credibility.
“We were on the verge of soft landing,” said Diane Swank, the chief economist KPMG. “The biggest mistake that the Federal Reserve can make is to instill additional inflation while weakening the economy.”
This story was originally shown on Fortune.com
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