Jerome Powell Asked Point Blank About Effect Of Tariffs On Inflation

yesterday

Fed Chair Jerome Powell is asked about tariffs and inflation.

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Transcript

00:00VICTORIA GUIDO.

00:01Hi, Victoria Guido with Politico.

00:03I wanted to ask, first of all, if you could clarify, you were talking about how tariffs

00:09were a good part of the uptick in the inflation forecast, and I was just wondering what that

00:14specifically refers to.

00:16Is that the tariffs that have already been put in place?

00:18Is that anticipating some of the tariffs that might be coming on April 2nd?

00:22And then, also, if you wouldn't mind talking a little more about the balance sheet decision

00:27and what drove that.

00:29Did that have anything to do with expectations of how the debt ceiling-raising the debt ceiling

00:33might affect the reserve supply?

00:34CHAIRMAN POWELL.

00:35Yes.

00:36So, in the SEP, you'll see that there's not further progress on core inflation this year.

00:41We're kind of flatlining, going sideways.

00:44We don't ask people to say-to write down how much of this is from tariffs and how much

00:48of it is not.

00:49But some of it is from tariffs.

00:50We know that tariffs are coming in.

00:52We know that they're probably already-all forecasters have tariff inflation affecting

00:57core PCE inflation, core CPI inflation this year, without exception.

01:02I'm not aware of an exception.

01:03So it's in there.

01:04I can't tell you how much of that it is.

01:07In terms of the balance sheet, so, yes, we-I think-I guess the way I'd say it is, you know,

01:15it was the flows in and out of the TGA that got us thinking about it.

01:19But as we-you know, as we thought about it, we really came to the view that this was a

01:25good time to make the move that we made.

01:29And the Broad League Committee came around to the view that we would do the same thing

01:36we'd already done, which is, once we-I guess in June, we-was it June, whenever it was,

01:43we lowered the pace of QT.

01:47And we're just going to do that again.

01:48We're going to cut it roughly in half.

01:49And the sense of that is, if you're cutting the pace of QT roughly in half, then the runway

01:54is probably doubled, okay?

01:56So it's going to be slower for longer.

02:00And people really like that.

02:02People thought that's a good idea.

02:03You know, it's like a plane.

02:04You can think of it like a plane coming in for a landing.

02:07As we get closer, and we-by the way, we still think that reserves are abundant, although

02:12you begin to see some of the things we look at begin to react a little bit, but we still

02:17think that they're abundant.

02:18Now, of course, now the TGA is emptying out, so reserves are higher now, so you can't really

02:23see the underlying signal.

02:25So we came around to the view, and it had a lot of appeal, and so we did it.

02:29Really, it has no implications at all for monetary policy.

02:33It has no implications at all for the ultimate size of the balance sheet.

02:37It isn't sending a signal in any hidden way that you can try to tease out.

02:42It's just not there.

02:43We're basically-it's very consistent with our plans and our practices that we've published

02:48and that we've followed since we began this-what is a very successful, you know, rundown of

02:54the balance sheet.

02:55Again, the second time that we've slowed the pace, and we've said that we would stop when

03:01we were somewhat above the level we judge as ample, and clearly we're not at that level

03:05yet, but we're going to be approaching it more slowly.

03:08It's a common sense kind of a thing, and it had pretty broad appeal, I will say.

Jerome Powell Asked Point Blank About Effect Of Tariffs On Inflation

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