U.S. Fed in no hurry to cut as markets continue to swoon: Powell
U.S. Federal Reserve Chair Jerome Powell made clear the U.S. central bank won’t rush to react to sweeping Trump administration tariffs, or to the financial market turmoil that has ensued amid fears of a global economic downturn.
Tariffs are likely to have a significant effect on the U.S. economy, including slower growth and higher inflation, Powell said Friday at a conference in Virginia. But, he added, Fed officials will wait to gain more clarity on those policies before lowering interest rates.
He also emphasized that, with inflation still elevated, the central bank had an obligation to make sure a temporary price boost from tariffs doesn’t turn into something more persistent.
“The Fed is in no position to offer the kind of insurance to the economy that they did in the 2018, 2019 trade war because inflation is too high and it’s above their target,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives, who sees a recession in the second half of the year. “Even if they conclude that they need to cut rates, they’re likely to go later and slower than they would otherwise because we will be in the middle of an inflation impulse.”
Stocks plummeted Friday, continuing a rout that started after President Donald Trump announced sweeping new tariffs on imports from across the globe. The S&P 500 was on pace for its worst week since the Covid lockdowns of March 2020 and Treasuries rallied, sending 10-year yields below 4%.
