• Risk of persistent inflation
  • Fed determined to keep expectations firmly

The president of the US Federal Bank (Fed), Jerome Powell, warned Friday that Donald Trump’s new duties are “bigger than expected”, which may lead to higher inflation and growth. His statements mark the difficult decisions in front of her Fed.

“We are facing an extremely uncertain environment with increased risks of both rising unemployment and inflation,” Powell said in a speech at a conference of business reporters.

It is noted that shortly before Jerome Powell’s speech, Donald Trump invited him to cut interest rates and “stop political games”.

His statements come as global markets continue to fall, with the US brokerage indicators having lost about 10% of their value from the announcement of new duties. Powell did not comment on Selloff immediately, but he acknowledged that the same uncertainty that floods investors and company executives was also facing the Fed.

Powell said the Fed has time to wait for more data before deciding how to adapt its monetary policy. However, he stressed that the main priority of the central bank is to ensure that the expectations for inflation will remain stable, especially if Trump’s new duties cause a more persistent increase in prices.

“While duties are very likely to cause at least one temporary increase in inflation, it is also possible that the impact is more persistent,” Powell said.

“Avoiding this scenario will depend on maintaining long -term expectations for inflation, impact size and how quickly they will be passed on to prices,” he noted. The Fed’s obligation stressed that it is to maintain long -term expectations for inflation stable and to ensure that a lump sum increase in prices will not evolve into a constant inflation problem.

Powell said it was not the role of the Federal Bank to comment on Trump’s government policies, but to react to the impact they may have on the economy, which he and his colleagues considered, until a few weeks ago, that he was in a “ideal” and low -key.

However, his comments underlined the increasing tension between “harsh” financial data, such as increasing jobs by 228,000 in March and unemployment to 4.2%, and “mild” data, such as surveys and interviews with entrepreneurs showing a slowdown in the economy.

“We are closely watching this tension. As their new policies and potential economic impacts become clearer, we will get a better picture of their consequences on economy and monetary policy, “Powell said.

He noted that uncertainty remains increased, but it is now clear that duties were significantly higher than expected. “The same will probably happen to the economic impacts, which will include higher inflation and lower growth,” he said.

According to Powell, the Fed is able to wait before considering any adjustments to its policy, as it is too early to determine the appropriate course for monetary policy.