Federal Reserve Chairman Jerome Powell stated on the 16th that the U.S. government's tariff policy may pose challenges for the Federal Reserve in balancing its dual mandate of price stability and employment promotion.
Speaking at the Economic Club of Chicago, he said, "We may find ourselves in a challenging situation where our dual mandate objectives are in tension."
He pointed out that the tariff increases announced by the U.S. government so far have exceeded expectations, and their economic impact may be significant as well, including causing an increase in inflation rates and a slowdown in economic growth.
He mentioned that surveys of households and businesses show that U.S. consumer confidence is plummeting, and their uncertainty about the economic outlook is intensifying. Several institutions have downgraded their forecasts for U.S. economic growth this year, generally believing that the economic growth rate will further slow down. The Federal Reserve is closely monitoring upcoming economic data.
During the Q&A session following the speech, Powell stated that tariffs might distance the Fed from its goals.
He indicated that tariffs "are likely to lead to at least a temporary increase in inflation," but the inflationary effects could last longer. The Federal Reserve's main task is to ensure that the "one-time price increases" caused by tariffs do not trigger more sustained inflationary effects.
When asked if the Federal Reserve would intervene in the event of significant stock market volatility, Powell's answer was "no."
He stated that the market is processing the current information landscape, which naturally leads to increased volatility. Considering that the U.S. government's tariff policy is undergoing significant adjustments, market turbulence is a reasonable reaction.
The market expects the Federal Reserve to start cutting interest rates again in June and to reduce rates by 75 to 100 basis points by the end of the year.