The potential shape and economic effects of the Trump administration’s policies on trade, immigration, fiscal policy and regulation remain uncertain, but Federal Open Market Committee members do not need to be in a hurry when setting monetary policy “and are well positioned to wait for greater clarity,” Federal Reserve Chairman Jerome Powell said today.
Speaking at a monetary policy forum in New York City, Powell noted that inflation has come down from its 7% peak in 2022 but remains above the Fed’s 2% objective. Still, he said, “most measures of longer-term [inflation] expectations remain stable and consistent with our 2% inflation goal.”
Powell noted the Trump administration is in the process of implementing significant policy changes. “It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy,” he said. “While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their likely effects remains high.”
Powell added that monetary policy is not on a preset course.
“If the economy remains strong but inflation does not continue to move sustainably toward 2%, we can maintain policy restraint for longer,” he said. “If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we can ease policy accordingly. Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.”
