Jerome Powell, the Chair of the Fed, comments today on the situation of the US economy. The Fed Chair points out that there is no risk-free policy path ahead, and although the labor market has weakened, prices continue to rise, and the cost of living in the US remains high.
- Public trust in economic and political institutions has been undermined; public officials must focus closely on their core missions.
- We will ensure that a one-time price increase does not turn into a persistent inflation problem.
- Tariff increases will likely result in somewhat higher inflation over the next several quarters.
- The reasonable base case is that the tariff-driven inflation effects will be relatively short-lived.
- Disinflation in services continues; most long-term inflation expectations are consistent with the 2% target.
- Goods price increases largely reflect the impact of tariffs, not broader price pressures.
- The 12-month PCE inflation was probably 2.7% in August, with core PCE at 2.3%; both figures are higher than a year ago and driven by goods prices.
- Consumer spending has slowed, and businesses say that uncertainty weighs on the outlook.
- There has been an unusual and challenging decline in both the supply and demand for workers.
- The labor market is less dynamic and somewhat softer."
- Inflation has risen and remains elevated.
- Economic growth has moderated, and risks to employment have increased.
- Long-term inflation expectations are consistent with the 2% target.
- Some asset prices are elevated relative to historical levels. Equities are fairly highly valued.
- We do not target specific levels of financial asset prices.
- This is not a period of elevated risks to financial stability.
- Banks are well-capitalized, and households remain in good shape.
- We need to adjust our policy toward a more balanced approach.
- Ahead of the next meeting, we will closely examine labor market conditions, growth data, and inflation to assess whether policy is appropriately positioned.
- If it is not, we will adjust it accordingly.
- The focus on inflation must be moderated in favor of a more balanced approach.
- The labor market softened over the summer.
- The Beige Book pointed to moderate growth.
- I cannot say that AI is the main reason. Artificial intelligence means that some jobs will be phased out, while others will evolve
