Introduction
Jerome Powell, the Chairman of the US Federal Reserve (Fed), has recently noted signs of a slowdown in the US economy in the first quarter of 2025. Despite this development, he sees no urgent need for the Fed to act, as the economy remains solid. However, Powell emphasizes that the recent trade measures by the US government under President Donald Trump could have significant impacts.
Main Points from Powell’s Statements
Economic Slowdown
The data indicates that growth in the first quarter is slower than in the previous year. This shows a certain cooling compared to prior years.
Impact of US Tariffs
The tariffs imposed are stronger than expected and could lead to higher inflation and slower growth. They also negatively affect unemployment and increase pressure on the Fed’s inflation target.
No Urgent Need for Action
Powell considers it unlikely that the Fed will intervene in the short term unless there are significant market disruptions or a collapse of the treasury bond market. Interest rate policy may remain unchanged for now to gain more clarity on economic developments.
Impacts on Markets and the Economy
The financial markets reacted negatively to Powell’s speech; American stocks fell sharply, and cryptocurrencies like Bitcoin also suffered declines. The unpredictability in trade policy increases uncertainty and puts pressure on the inflation target as well as employment numbers.
Possible Future Developments
The markets may expect an interest rate cut by the end of the year of about one percentage point from the current level between 4.25% and 4.50%, although this depends on further economic developments. Jerome Powell’s message is clear: despite existing risks, the Federal Reserve will not make hasty changes and remains flexible to adjust its policy if necessary.