Federal Reserve Chairman Jerome Powell addressed various economic topics, including housing services inflation, recession probabilities, and the impact of tariffs. Powell stated that forecasters have slightly increased the likelihood of a recession, though it remains low. He emphasized that the University of Michigan inflation expectations reading is an outlier and that clarity on the economic outlook is challenging to predict.
The Fed is monitoring whether higher goods inflation in the first two months of the year stems from tariffs. Powell noted that strong goods inflation readings over recent months, if persistent, are likely tied to tariffs. He reiterated that tariffs tend to reduce growth while increasing inflation, but the effects are expected to be transitory.
Powell highlighted the importance of focusing on hard economic data rather than survey data, which currently shows a rise in uncertainty and downside risks. He assured that the costs of waiting, given the solid economy, remain low. Additionally, he mentioned that the Fed desires MBS to roll off its balance sheet and would carefully consider allowing this even after ceasing to shrink the total balance sheet.
— news from Forex Factory