A soft inflation landing can still be in sight, but when the president of The United States Federal Reserve, Jerome Powell, speaks in New York on Fridaywill face an entangled set of New risks For that objective pursued for a long time, from a World Trade War which could revive pressures on prices until indications that public expectations can be changing in a bad sense for the US central bank.
Powell will rule his speech at an economic conference just before the communications blackout for the Fed Monetary Policy Meeting of March 18 and 19.
It will be your opportunity to publicly evaluate The economic impact that it is still about to see of the expansive tariffs that President Donald Trump has applied to imports of the main commercial partners of the United States – of those expected more – the efforts of the new administration to reduce the federal government and its expense in contracts, as well as more strict immigration rules.
Although the changes in measures are too recent and there were too fast to see substantial repercussions in the data beyond the daily oscillations in the markets of shares, bonds and currencies, together they made it made that The risk of “stagflation” becomes a topic of conversation between analysts.
Some of Powell’s fellow monetary policy responsible warned that Fed could soon have to make difficult decisions between continuing to fight inflation over the objective or reinforce economic growth and employment with interest rates.
After subtracting importance to the impact of tariffs, which is probably only ephemeral and punctual in prices, the scope of new import taxes with which Trump threatens Canada, Mexico and China, their potential to alter the behavior of companies and households, and reprisals already underway by these commercial partners can make that position difficult to maintain.
“The Fed is not to fix commercial policy or fiscal policy. The government can do what you want.”Said Adam Posen, former head of the Monetary Policy of the Bank of England and president of the Peterson Institute for International Economics of Washington.
However, at this point, The Federal Reserve “should affirm much more explicitly, based on all available teststhat tariffs are more likely to be inflationary (…). They start from a position in which the risks of inflation are not low. “Powell plans to speak at 1730 GMT before an annual monetary policy forum organized by the Booth School of Business (Booth Business School) of the University of Chicago.
The Federal Reserve is expected to maintain its reference interest rate in the 4.25% -4.50% range at its next meeting.
The new forecasts of monetary policy responsible, however, will provide a measure of how deeply the first weeks of the Trump government have changed the perspective between the US central bankers on the appropriate economy and monetary policy.
Waiting for key data before speech
A report by the Challenger Relocation Company, Gray & Christmas showed Thursday The largest number of job cuts announced in almost five yearsled by an increase in federal government dismissals under Trump’s mandate.
The new applications for unemployment subsidies by federal former workers shot at a maximum of four years at the end of Februaryshowed another report from the Labor Department, in addition to the concern that domino effects for government contractors are soon produced.
The stock markets that reached historical maximums in February fell sharply after the introduction of tariffs by Trump. Consumer spending fell unexpectedly in January and The main American retailers are warning of the possibility of a weak 2025.
Economists, meanwhile, continue to estimate a solid increase in employment last month, in which the unemployment rate would remain in a historical minimum of 4.0%.
For now, Investors are committed to the economic deceleration will compensate for the impact of tariffs on priceswill maintain inflation under control and take to the Federal Reserve to cut the types in three quarters of a percentage point this year, more than expected in December by the two monetary policy of the Federal Reserve.
If inflation starts up, lYou were responsible for the Federal Reserve recently that anything can happenand referred to the stresses to fight the inflation of the former president of the Federal Reserve Paul Volcker in the early 1980s, who reappeared in comments from the economic leaders.
The message, as analysts explain, is whether inflation is revived, and, especially, if the public perspectives on the next price increases begin to rise, The Federal Reserve will not be able to afford to balance its inflation objective with the concern for employmentbut you will have to do what is necessary to keep pressures on prices under control.
Source: Ambito
