The Federal Reserve has held interest rates steady, but marked up its outlook for inflation and revised down its growth forecasts citing Trump’s economic policies.
The central banks decision keeps the benchmark rate between 4.25 percent and 4.5 percent as analysts expected.
Powell indicated that, despite fears of inflation caused by tariffs, the Fed would stick to its plan to cut rates twice this year.
That pleased investors, and sent US stock indexes up in afternoon trading, with the S&P 500 rising 0.8 percent.
Lower rates make it cheaper for businesses to borrow money but crucially it also cuts borrowing costs for ordinary Americans, who then have more to spend on goods and services.
‘We do not need to be in a hurry to adjust our policy stance,’ Powell said in comments made after the rate announcement.
Fed officials marked up their outlook for inflation this year, with their preferred measure of price increases expected to end the year at 2.7 percent versus the 2.5 percent anticipated in December.
The Feds target is to get inflation down to 2 percent.
Powell said rising inflation expectations is in ‘good part’ due to tariffs as a ‘driving factor’.
President Trump’s tariff headlines sent the S&P 500 in to correction just last week.
Explaining the Fed’s ‘wait and see’ decision Powell said the new administration’s policy changes in trade, immigration, fiscal policy and regulation will have a combined impact on the economy.
‘It’s the net effect of these policy changes that’ll matter for the economy and for the path of monetary policy’ Powell said.
As well as rising inflation forecasts the central bank now sees economic growth slowing more than previously expected.
The combination of higher inflation and slowing growth could lead to a dreaded period of stagflation.
Economists have ramped up warnings a recession may be looming as Americans fall behind on auto loans and consumers long-term expectations for inflation soared to the highest levels since the 1990’s.
