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Investing.com -- Federal Reserve Chair Jerome Powell signaled a cautious stance on monetary policy Friday, emphasizing the need to anchor inflation expectations even as political pressure mounts for rate cuts.
Speaking amid heightened market volatility and renewed trade war tensions, Powell said the economic impact of tariffs is “likely larger than expected” and warned that their inflationary effects could be persistent.
In prepared remarks for a business journalists’ conference, Powell said that the Fed "must ensure price hikes don’t lead to ongoing inflation,” suggesting the central bank remains on alert for second-round effects from rising import costs.
Powell also addressed the central bank’s policy positioning, saying the Fed is “well-positioned to wait to consider adjustments.”
His comments reinforce the view that policymakers are in no rush to ease, despite growing market bets on cuts and political pressure from President Donald Trump.
Just minutes before Powell began his speech, Trump urged him to cut rates in a post on Truth Social, citing falling energy prices, easing inflation, and a surge in job creation.
“This is the perfect time for a rate cut,” Trump wrote, adding that Powell should “stop playing politics.”
The Fed chair did not respond directly to the president’s remarks but reiterated the central bank’s independence and inflation mandate.
“The Fed is obligated to keep inflation expectations anchored,” Powell said.
Markets, already under pressure from rising global trade tensions and retaliatory tariffs, modestly extended losses following Powell’s remarks.
Investors had increasingly looked to the Fed for a policy response as equities slid and Treasury yields dropped to multi-month lows.
While acknowledging the economic risks from tariffs, Powell’s message was clear: the Fed will not rush to accommodate market or political demands. Instead, it will act based on incoming data and its dual mandate.
“Possible tariffs could have a persistent inflation impact,” he warned.