Powell stated that he will maintain policy stability until the situation becomes clearer and is not in a hurry to decide on the monetary policy path.

Compiled by: Jin Shi Data

In his latest speech on Friday, Federal Reserve Chairman Powell reiterated the Fed's commitment to maximizing employment and stabilizing inflation (2% target), noting that the current economy is robust but faces uncertainties such as trade policy. The labor market is balanced, inflation is slowing but still under pressure, and monetary policy will remain cautious and flexibly adjusted based on data to prevent short-term shocks from evolving into persistent inflation. He repeatedly mentioned uncertainty, indicating the need to continue observing and waiting for more clarity. Regarding tariffs, he stated that the increase in tariffs will be larger than expected, and the economic impact may also be more significant than anticipated.

Full Text of Powell's Speech

Thank you for inviting me today. Monetary policy is more effective when the public understands what we are doing and why. Through your work, journalists like you help promote a deeper understanding. I believe many of you have questions you would like to ask. Before answering some questions, I will briefly outline the economic and monetary policy outlook.

At the Federal Reserve, we focus on achieving the dual mandate given to us by Congress: maximizing employment and stabilizing prices. Despite high uncertainty and rising downside risks, the economy remains in good shape. The latest data indicate robust economic growth, a balanced labor market, and an inflation rate that is close to but still above our 2% target.

Recent Economic Data

After several years of solid growth, many forecasters expect a slowdown in growth this year. Preliminary data for first-quarter GDP will be released later this month. Limited hard data aligns with a slower but still robust growth outlook. Meanwhile, surveys of households and businesses indicate a decline in expectations and an increase in uncertainty about the outlook. Survey participants noted that new federal policies, particularly those related to trade, are having an impact. We are closely monitoring the discrepancies between these hard data and soft data. As new policies and their potential economic impacts become clearer, we will have a better understanding of how these policies affect the economy and monetary policy.

From multiple indicators, the labor market appears to be roughly balanced and has not become a significant source of inflationary pressure. This morning's employment report showed that the unemployment rate in March was 4.2%, remaining low since early last year. In the first quarter, non-farm payrolls averaged an increase of 150,000 jobs. Low layoff rates, moderate job growth, and a slowing labor force participation rate have all contributed to the stability of the unemployment rate.

Turning to another aspect of the dual mandate, inflation has sharply declined from the pandemic peak in 2022. This decline has occurred without the high unemployment pain typically associated with tightening monetary policy. Recently, inflation has made progress toward the 2% target, but this progress has slowed. In February, personal consumption expenditures (PCE) prices rose 2.5% year-on-year. Core PCE prices, excluding the more volatile food and energy categories, rose 2.8%. Looking ahead, higher tariffs will gradually impact our economy and may push inflation up in the coming quarters. Market expectations and survey data indicate that short-term inflation expectations have risen. By most measures, long-term inflation expectations (i.e., expectations for several years out) remain stable and are consistent with our 2% inflation target. We remain committed to sustainably restoring the inflation rate to the 2% target.

Monetary Policy

When it comes to monetary policy, we face a highly uncertain outlook with risks of higher unemployment and higher inflation. The new administration is implementing significant policy changes in four different areas: trade, immigration, fiscal policy, and regulation. Our monetary policy stance is prepared to address these risks and uncertainties and will be adjusted once we have a clearer understanding of policy changes and their potential impacts on the economy. It is not our role to comment on these policies. Instead, we assess their potential impacts, observe economic behavior, and adjust monetary policy accordingly to best achieve our dual mandate goals.

We have made it clear that assessing the potential impact of increased tariffs on the economy is very difficult until we have more information about the details of the tariffs, such as the targets, rates, and duration, as well as retaliatory measures from trade partners. Currently, although uncertainty remains high, it is now evident that the increase in tariffs will be larger than expected. The economic impact may also be more significant than anticipated, including higher inflation and slower growth.

The scale and duration of these impacts remain unclear. While tariffs are likely to lead to at least a temporary rise in inflation, they may also have more lasting effects. The key to avoiding this outcome is to maintain stable long-term inflation expectations, the scale of the impacts, and the timing of how these impacts are transmitted to prices. Our responsibility is to ensure that long-term inflation expectations remain stable and that one-time price level increases do not turn into a persistent inflation problem.

We will continue to closely monitor upcoming data, changes in the economic outlook, and the balance of risks. Our policy stance will not be easily adjusted until we have a clearer understanding of the future outlook for the economy. It is still too early to conclude what the appropriate path for monetary policy should be.

Conclusion

We understand the benefits of a robust economy—allowing workers to find jobs and keeping inflation low and predictable. We also understand that excessively high levels of unemployment or inflation can harm and cause pain to communities, families, and businesses. That is why we at the Federal Reserve will continue to do everything we can to achieve the goals of maximum employment and price stability.

Thank you all. I look forward to your questions.

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