Fed Chair Powell Says Trump Tariffs May Delay Progress Toward Price Stability, Retail Keeps Faith In Macro Outlook For Now
Powell said it is too early to determine how much of the rise in inflation is attributable to tariffs.
FollowFederal Reserve Chair Jerome Powell said on Wednesday that tariffs may slow down further progress toward price stability.
At a press conference following the central bank’s latest moves, Powell said the summary of economic projections does not show “further downward progress” on inflation, primarily due to tariffs.
Earlier in the day, the Federal Reserve kept its key borrowing rate between 4.25% and 4.5%, aligning with market expectations. It also trimmed growth forecasts and raised inflation expectations for the U.S. economy in 2025.
Powell also said it is too early to determine how much of the rise in inflation is attributable to tariffs.
“We will be working, and so will other forecasters, to find a way to separate non-tariff inflation with tariff inflation,” Powell added.
Since taking oath for the second time, President Donald Trump has upended global trade by imposing a swathe of tariffs.
The U.S. has slapped 20% tariffs on goods imported from China and 25% tariffs on goods from Mexico and Canada that are not compliant with the U.S.-Mexico-Canada Agreement. Trump has also pledged to put reciprocal tariffs on all countries.
“Looking ahead, the new administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and deregulation. It is the net effect of these policies that will matter for the economy and for the path of monetary policy,” Powell said.
He added that the Federal Reserve is willing to maintain policy restraint for longer if the economy remains strong and inflation does not sustainably move toward the central bank’s 2% target.
Following Powell’s speech and rates decision, the SPDR S&P 500 ETF Trust (SPY) closed the day with a 1.1% rise, while the Invesco QQQ Trust, Series 1 (QQQ) was up 1.3%.
Retail sentiment surrounding these ETFs remained in the ‘bullish’ territory on Wednesday.
SPY’s Sentiment Meter and Message Volume as of 11:02 p.m. ET on March 19, 2025 | Source: Stocktwits
QQQ’s Sentiment Meter and Message Volume as of 11:07 p.m. ET on March 19, 2025 | Source: Stocktwits
One retail user said Powell’s comments essentially encourage people to enjoy a market rally over the next two weeks until April 2, when Trump’s reciprocal tariffs are expected to kick in.
Morgan Stanley Investment Management’s Jim Caron told CNBC that April's events will be crucial, and the Federal Reserve’s tone might change by the next meeting in May.
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