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Fed Chair Jerome Powell Warns of Increased Supply Shocks
Federal Reserve Chair Jerome Powell cautioned on Thursday that the U.S. economy might be entering a period of more frequent and persistent supply shocks. Speaking at a research conference in Washington, D.C., Powell described this as a significant challenge for both the economy and central banks. His remarks come just a week after the Federal Reserve decided to hold interest rates steady amid ongoing economic uncertainty.
Powell noted that the current economic landscape has shifted considerably since the Fed’s last strategy meeting in 2020. Interest rates are now substantially higher, largely driven by real rates, given the relative stability of long-term inflation expectations.
The current federal funds rate remains in the 4.25% to 4.50% range. The Fed’s decision last week to hold rates suggests a cautious approach as they continue to assess the potential economic risks stemming from trade policies. The central bank’s next meeting is scheduled for mid-June, and current predictions suggest the benchmark rate will likely remain unchanged.
Powell also raised concerns about the potential for increased inflation volatility due to higher real rates, exceeding levels experienced in the 2010s. While inflation saw a slight decrease last month, it still sits above the Fed’s 2% target.
These comments arrive as American consumers and businesses navigate continued economic uncertainty. Recent trade developments, including agreements with the U.K. and China, have provided a boost to the stock market. However, analysts and economists caution that significant tariff challenges remain.