The president of the Federal Reserve, Jerome Powell, said Wednesday that he expects President Donald Trump’s tariff policy to cause greater inflation and slower economic growth, which complicates the potential efforts of the Central Bank to relieve the consequences.
“The level of rate increases announced so far is significantly greater than expected. The same is likely to be true for economic effects, which will include greater inflation and slower growth,” Powell told the audience in the Chicago Economic Club.
Powell’s comments immediately sent lower shares as investors digites the concern of the main central bankers for tariffs.
In a matter of minutes, the Dow Jones Industrial Avenge fell 690 points, or 1.7%, more than tripled losses suffered during the day before Powell’s comments.
As Powell spoke, the S& P 500 fell 2.3%, while the nasdaq technological heavy fell 3.4%. Both indices deepened the losses suffered earlier in the day.
The shares had fallen in the first operations on Wednesday after the chips manufacturer Nvidia revealed that he was registering a charge of $ 5.5 billion according to a new restriction of Trump’s administration on exports to China.
Wednesday’s address marked Powell’s first public comments since Trump last week stopped his so -called “reciprocal tariffs” in most countries for 90 days. The actions shot minutes after Trump’s announcement, recovering much of the losses suffered after the “Liberation Day” tariffs begin a week earlier. He attended one of the most volatile weeks in the history of Wall Street.
“The markets are fighting with great uncertainty and that means volatility,” Powell said Wednesday. Even so, he added, volatility reflected the importance of policy changes, rather than abnormal behavior in markets.
“They are working almost as you would expect to work,” Powell said.
President Donald Trump arrives at a ceremony to present the trophy of the commander in chief of the US Naval Academy Soccer.
Win McNamee/Getty Images
At the same time, Trump stopped some rates last week, also increased tariffs on China, carrying out Chinese products at a cumulative level of 145%. In response, China rose tariffs on US goods to 125%, increasing a commercial war between the two largest economies in the world.
Powell said earlier this month that he expected Trump’s tariff policy to increase prices and slow down economic growth, while pointing out that key indicators “still show a solid economy.”
The policy changes implemented by the White House have contributed to a “highly uncertain perspective,” Powell said.
Last month, the Fed chose to maintain stable interest rates, even when the Central Bank said it expected higher inflation and slower economic growth than it had predicted in December. The Fed will announce its next interest rate decision on May 7.
Powell indicated Wednesday that Fed can address interest rates with restriction as policy formulators observe the economic effects of Trump tariffs.
“The American economy is still in a solid position,” Powell said. “At the moment, we are well positioned to expect greater clarity before considering any adjustment to our policy position.”
