Federal Reserve Chairman Jerome Powell addressed a policy forum sponsored by the University of Chicago's Booth School's Clark Center for Global Markets, outlining the central bank's cautious approach in light of President Donald Trump's aggressive policy actions. Speaking before an audience that included multiple Federal Reserve officials, Powell emphasized that the central bank could afford to wait and observe the economic impacts of these policies before making further decisions on interest rates.
The Fed's preferred inflation gauge indicated a 12-month inflation rate of 2.5%, while excluding food and energy, inflation was slightly higher at 2.6%. Despite concerns from the White House regarding the potential economic impact of Trump's policies, Powell spoke positively about the macroeconomic environment, noting that the U.S. is in "a good place" with a solid labor market.
"The labor market is solid and broadly in balance," said Jerome Powell.
Addressing the forum, Powell highlighted the recent jobs report, which showed a gain of 151,000 in nonfarm payrolls for February. However, the unemployment rate edged higher to 4.1%. Average hourly earnings rose by 0.3% in February and were up 4% on an annual basis, indicating that wages are growing at a sustainable pace compared to earlier in the pandemic recovery.
"Wages are growing faster than inflation, and at a more sustainable pace than earlier in the pandemic recovery," Powell remarked.
Powell reassured the audience that the Federal Reserve's current policy stance is well-positioned to address the risks and uncertainties as it pursues its dual mandate of maximum employment and stable prices.
"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," Powell stated.
Fed Governor Adriana Kugler also attended the forum and expressed her views on inflation. She identified "important upside risks for inflation," suggesting that it might be appropriate to maintain the policy rate at its current level for an extended period.
Powell acknowledged that while there have been bumps on the path to achieving the Fed's inflation target, patience remains crucial as the central bank seeks greater clarity on economic conditions.
"The path to sustainably returning inflation to our target has been bumpy, and we expect that to continue," said Jerome Powell.
He reaffirmed that there is no urgency for immediate policy changes, allowing time to assess the broader economic impact of current policies.
"We do not need to be in a hurry, and are well positioned to wait for greater clarity," Powell concluded.
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