Indirect implications of Trump administration’s tariff impact due to constantly changing economic conditions and policies
사진 확대 Federal Reserve Chair Jerome Powell
Jerome Powell, chairman of the Federal Reserve System (Fed), predicted that long-term interest rates will rise further. This is because economic volatility has increased due to the Trump administration’s tariff policy.
Powell made the remarks in a welcoming speech at the Thomas Robach Research Conference in Washington, DC, on the 15th (local time). This position is focused on overhauling the Fed’s policy framework. Powell said a lot has changed in the past five years after reviewing the policy framework in the summer of 2020.
“Higher interest rates (in the long term) reflect that inflation may be more volatile than it was during the pre- and post-crisis period of the 2010s,” Powell said, adding that “we could enter a period of more frequent and potentially more persistent supply shocks, which is a tougher challenge for the economy and the central bank.”
Powell’s remarks are interpreted as meaning that it will be difficult for long-term interest rates to become zero interest rates as in the past.
In addition, the supply shock was analyzed in a similar context to Powell’s recent policy changes, which made it difficult for the Fed to balance its dual responsibilities of full employment and price stability.
Powell did not explicitly state the Trump administration’s tariffs, but he recently said the tariffs are likely to slow growth and raise inflation.
Regarding the review of the policy framework, Powell said, “In discussions so far, participants have judged that it is appropriate to reexamine the way of expression and deficiencies,” adding, “At last week’s meeting, we took a similar position on the average inflation target. We will ensure that the new consensus statement broadly covers the economic environment and development,” he said.