Reporter To Fed Chair Jerome Powell: How Much Of The Higher Inflation Forecast Is 'Due To Tariffs?'

2 days ago

During a press briefing on Wednesday, Federal Reserve Chair Jerome Powell was asked about the impact of President Trump's tariffs on the higher inflation forecast for this year.

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Transcript

00:00So, two things on sort of the real side here-inflation and then GDP.

00:08How much of the higher inflation forecast for this year is due to tariffs, and since

00:13the policy path remains the same, are you effectively reading this as a one-time price

00:18level shock?

00:19CHAIRMAN POWELL.

00:20Okay.

00:21So, how much of it is tariffs?

00:24So, let me say that it is going to be very difficult to have a precise assessment of

00:30how much of inflation is coming from tariffs and from other-and that's already the case.

00:35You may have seen that goods inflation moved up pretty significantly in the first two months

00:40of the year.

00:41Trying to track that back to actual tariff increases, given what was tariffed and what

00:46was not, very, very challenging.

00:48So some of it-the answer is, clearly, some of it, a good part of it, is coming from tariffs

00:54but we'll be working, and so will other forecasters, to try to find the best possible way to separate

01:00non-tariff inflation from tariff inflation.

01:04In terms of the-your sort of looking-through question, too soon to say about that.

01:11As I've mentioned, it can be the case that it's appropriate sometimes to look through

01:17inflation if it's going to go away quickly without action by us, if it's transitory.

01:23And that can be the case in the case of tariff inflation.

01:28I think that would depend on the tariff inflation moving through fairly quickly and would depend

01:34critically as well on inflation expectations being well anchored-longer-term inflation

01:39expectations being well anchored.

01:41Well, I guess I'm looking at the out years here and the fact that the policy path doesn't

01:45change at all and inflation is unchanged in the out years also, doesn't that imply you

01:52all have basically decided that there is no signal here and that it's just going to-we're

01:58back to transitory again?

02:00So I think that's kind of the base case, but as I said, we really can't know that.

02:05We're going to have to see how things actually work out.

02:08And the fact that there wasn't much change, I think that's partly because, you know, you

02:13see weaker growth but higher inflation, they kind of offset, and also, frankly, a little

02:18bit of inertia.

02:19When it comes to changing something in this highly uncertain environment, you know, I

02:24think there is a level of inertia where you just say, maybe I'll stay where I am.

02:32Colby Smith with the New York Times.

02:33You just described-

Reporter To Fed Chair Jerome Powell: How Much Of The Higher Inflation Forecast Is 'Due To Tariffs?'

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