U.S. Federal Reserve Chair Jerome Powell has emphasized that the Fed is not ready to implement a ‘Fed put’ amid economic uncertainty. The term ‘Fed put’ refers to actions taken by the Federal Reserve to stabilize plummeting stock markets. However, with the current economic situation unclear due to potential impacts from tariffs and other fiscal measures, the Fed is choosing to wait and observe before making any drastic interest rate changes.
Powell stated that the Fed will not rush to cut interest rates unless there is a clear crisis requiring an immediate central bank response. Although job growth in March remained strong, the data was collected before recent tariff announcements. The Fed is cautious about making moves that may need to be reversed, especially given the risk of higher inflation necessitating rates to remain elevated.
The current economic shock stems from White House policy decisions to impose high tariffs on imports, leading to retaliatory actions from other nations. This could hinder growth and potentially trigger a recession. JPMorgan economists now estimate a decline in full-year GDP by 0.3%, contrasting with their earlier projection of 1.3% growth, alongside an expected rise in the unemployment rate.
The average tariff rate on approximately $3 trillion in annual U.S. imports is set to increase significantly, likely impacting consumer prices and pushing inflation higher. This scenario poses challenges for the Fed, as higher inflation and unemployment call for differing policy solutions.
Until the direction of the economy becomes clearer, the Fed plans to remain unhurried in its decision-making process.
— new from Reuters