Washington: Jerome Powell, Chairman of the US Federal Reserve, has identified tariffs on imported goods as the primary reason behind the rising inflation in the United States, rather than increased consumer demand. His remarks came amid global attention to the impact of American trade policies on world economies.
Speaking on Wednesday local time, Powell explained, “The high inflation figures largely reflect increased prices in the goods sector, which are influenced by tariffs.” He added that price pressures in the services sector are gradually easing.
During the same meeting, the Federal Open Market Committee (FOMC) decided to keep interest rates steady between 3.5 and 3.75 percent. Powell noted that the current policy stance remains appropriate as inflation continues to exceed the Federal Reserve’s 2 percent target.
According to Powell, the majority of the tariff impact has already been felt across the economy. “Most of it has passed through. Tariffs generally act as a one-time price increase. Inflation related to tariffs tends to peak and then gradually decline,” he said.
He highlighted a contrasting trend in the services sector, where inflation is decreasing steadily, unlike the goods sector affected by trade measures.
Referring to inflation data, Powell shared that the core Personal Consumption Expenditures (PCE) inflation rate stood at 3.0 percent over the 12 months ending December, while overall PCE inflation was recorded at 2.9 percent. He also stated that inflation expectations among consumers and markets remain stable, with most long-term forecasts aligned with the Fed’s 2 percent goal.
Powell emphasized that the Federal Reserve is closely monitoring how tariff-related price increases evolve. He projected that unless new significant tariffs are introduced, goods inflation will peak soon and then begin to decline gradually.
On future policy, Powell clarified that the Federal Reserve has no fixed timetable. “Monetary policy is not on a predetermined path. We will assess conditions at each meeting before making decisions,” he said.
Discussing the US economy, Powell described growth as robust, supported by strong consumer spending and increased business investment, although the housing sector remains weak.
He acknowledged that recent progress in reducing inflation has slowed but stressed that this is not primarily due to demand factors. “If the rise in prices were demand-driven, controlling inflation would be much harder,” Powell remarked.
The United States is one of India’s largest trading partners, making the US trade policies and inflation trends globally significant. These factors affect supply chains, export pricing, and investment flows worldwide. Central banks generally consider tariff-induced price increases as temporary unless they alter long-term inflation expectations.
My name is Bhupendra Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.
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