US Federal Reserve chairman Jerome Powell on Wednesday said the economic effects of America's recently announced tariffs could force the central bank to decide whether to prioritise high inflation or weakening growth.
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Mr Powell told the Economic Club of Chicago.
Unlike most other central banks, the Fed has two mandates – maintaining price stability and promoting employment growth. Economists fear that Mr Trump's larger-than-expected tariffs could reignite inflation, drive up unemployment and weaken growth.
“If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” Mr Powell said.
He said he expects the US economy to slow in the first quarter compared to last year's pace.
However, he maintained his suggestion that the Fed could be patient in cutting interest rates as it awaits “greater clarity” on tariffs, immigration, deregulation and taxation.
Mr Powell said tariffs will probably create at least a temporary inflationary bump but warned the effects could be more persistent.
Part of the reason why tariffs may not lead to a one-time surge could be due to disruption in the global supply chain as a result of duties on China, and the impact of tariffs on the auto industry.
“That is the kind of thing it can take time to resolve, and it can lead what would have been a one-time inflation shock to be extended, perhaps more persistent,” Mr Powell said.
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem."
His comments come as uncertainty over Mr Trump's tariffs has led to increased volatility in financial markets. That has fed into the bond market, with the yield on the 10-year Treasury rising more than 50 basis points last week to about 4.5 per cent at the end of last week, before settling at about 4.3 per cent this week.
Despite the uncertainty and volatility surrounding markets, Mr Powell maintained they remained healthy.
"Markets are doing what they're supposed to do. They're orderly, and they're functioning just about as you would expect to function," he said.
The Fed held its benchmark rate at about 4.3 per cent during its March meeting. Traders anticipate it will hold interest rates steady again next month before resuming cuts in June, according to CME Group data.
Current data shows that the US economy is in a good place. Reports showed the inflation cooled last month and that hiring remains solid, although surveys show consumer sentiment is plunging because of tariffs.
For the most part, Fed officials largely agree that tariffs will lead to a one-time bump in inflation, and have not included a recession in their respective base-case scenarios.
Low turnout
Two months before the first round on April 10, the appetite of voters for the election is low.
Mathieu Gallard, account manager with Ipsos, which conducted the most recent poll, said current forecasts suggested only two-thirds were "very likely" to vote in the first round, compared with a 78 per cent turnout in the 2017 presidential elections.
"It depends on how interesting the campaign is on their main concerns," he told The National. "Just now, it's hard to say who, between Macron and the candidates of the right, would be most affected by a low turnout."
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Brief scores:
Toss: Sindhis, elected to field first
Kerala Knights 103-7 (10 ov)
Parnell 59 not out; Tambe 5-15
Sindhis 104-1 (7.4 ov)
Watson 50 not out, Devcich 49
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
UAE currency: the story behind the money in your pockets
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At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
The Perfect Couple
Starring: Nicole Kidman, Liev Schreiber, Jack Reynor
Creator: Jenna Lamia
Rating: 3/5
BMW%20M4%20Competition
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POWERWASH%20SIMULATOR
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