Economic Situation in the USA
Jerome Powell, the chairman of the Federal Reserve, recently spoke at the Economic Club of Chicago about the economic outlook for the USA. He emphasized that the Fed’s two main goals – price stability and maximum employment – are not in conflict, although the US economy is facing increased uncertainty and downside risks.
Employment and Inflation
The US economy is currently near maximum employment, while inflation is slightly above the target value of 2%. The Fed expects inflation to average around 2.7% this year, attributed to the impact of tariffs.
Economic Growth
The Fed has lowered its growth forecast for the current year to 1.7%, due to increased uncertainty and the impact of tariffs. Despite these challenges, the risk of a recession is assessed as low.
Tariffs and Uncertainty
Tariffs and Inflation
Powell pointed out that tariffs could temporarily stoke inflation, but he expects this effect to be short-lived. However, experts warn of long-term inflation risks due to trade wars.
Uncertainty and Politics
The tariff policy of the US government has led to significant uncertainty, complicating the Fed’s decision-making process. Trump’s call for interest rate cuts has created tensions between the government and the Fed.
Monetary Policy
Current Interest Rates
The Fed has chosen to keep the key interest rate steady for now, currently ranging from 4.25 to 4.5%. It is expected that there could be two small rate cuts this year.
Future Decisions
Powell emphasizes the need for patience in future decisions, as the effects of current economic policy are not yet fully visible. Some Fed decision-makers advocate for a restrictive monetary policy to combat rising inflation expectations.
Overall, the economic situation in the USA remains complex, with challenges from tariffs, inflation, and uncertainty. The Fed faces the task of aligning its goals of price stability and maximum employment while monitoring the impacts of current political developments.