Jerome Powell spoke at a panel at the ECB Forum, taking place in Sintra until Wednesday, where he stated that a potential interest rate cut “will depend on the incoming data and what emerges in terms of inflation.”
The Fed will also be monitoring the labor market, where the expectation is for a “gradual cooling.”
Nonetheless, Powell highlighted that “the U.S. economy is in a good position, inflation has fallen to near 2%, unemployment is at 4.2%, [the U.S. economy is] healthy overall.”
“If you ignore tariffs, inflation is behaving as expected,” noted the Fed chair, adding that the effects of tariffs have yet to be seen and the central bank has always said the timing of these would be uncertain.
Some impacts from the tariffs are expected in the summer, he said, emphasizing that the Fed was “on pause when the magnitude of the tariffs was seen and all inflation forecasts went up.”
After the tariffs, the Fed did not react by adjusting rates, as it is “waiting while the economy is in a solid form” and any eventual decision will “depend on the data.”
