Federal Reserve Chair Jerome Powell said that the economy is in a “solid position” as the central bank monitors inflation and labor market data for signs that it needs to adjust monetary policy.
“Despite elevated uncertainty, the economy is in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment,” Powell said in his opening testimony before the House Financial Services Committee on Tuesday.
“Inflation has come down a great deal but has been running somewhat above our 2% longer-run objective. We are attentive to the risks to both sides of our dual mandate,” the chair said in reference to the Federal Reserve’s dual mandate to promote stable prices over the long-run as well as maximum employment.
The Fed has held off on cutting interest rates due to uncertainty over trade policy, as President Donald Trump has imposed tariffs on U.S. trading partners. Tariffs are taxes on imports that are generally paid by the importer, who often passes some or all of those additional costs on to consumers.
TRUMP PUSHES CONGRESS TO WORK OVER ‘VERY DUMB, HARDHEADED’ FED CHAIR POWELL AHEAD OF TESTIMONY
“The effects of tariffs will depend, among other things, on their ultimate level. Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined,” Powell said.
“Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity,” he said. “The effects on inflation could be short-lived – reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent.”
“Respondents to surveys of consumers, businesses, and professional forecasters point to tariffs as the driving factor. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2% inflation goal,” he added.
This is a developing story. Please check back for updates.
