From CNBC: 2025-04-16 13:58:00

Federal Reserve Chair Jerome Powell expressed concern over a potential dilemma between controlling inflation and supporting economic growth. The central bank leader anticipates higher inflation and lower growth due to President Trump’s tariffs, but the Fed is unsure where to focus. Powell emphasized the importance of balancing inflation and growth goals.

Powell stated that tariffs are likely to move the economy further from its goals, possibly for the rest of the year. He did not mention any indication of where interest rates are headed at this time. The Fed is prepared to wait for more clarity before considering any policy adjustments.

The Fed is expected to begin reducing rates in June, with three or four quarter-point cuts by the end of 2025. Fed officials view tariffs as a short-term impact on prices, but the broad nature of Trump’s tariffs could change that trend. Powell highlighted the increase in near-term inflation measures.

Survey and market-based measures show a rise in near-term inflation. The Fed’s key inflation measure is expected to be 2.6% for March. Powell emphasized the importance of keeping longer-term inflation expectations anchored. He reiterated similar points made in a previous speech about the threats to growth and inflation.

GDP for the first quarter is anticipated to show minimal growth, with strong motor vehicle sales offset by modest overall consumer spending. The Commerce Department reported better-than-expected retail sales in March, driven by car buyers looking to make purchases before tariffs. The economy is described as being in a solid position despite the expected growth slowdown.

The Atlanta Fed predicts GDP to grow at a -0.1% pace in Q1 when adjusting for unusual gold imports and exports. Powell noted the economy’s solid position despite the anticipated growth slowdown. Retail sales increased 1.4% in March, with strong gains seen in multiple sectors. Powell expects the slowdown to be temporary.

Join CNBC Pro LIVE at the New York Stock Exchange for expert insights in today’s financial landscape. Gain an edge with exclusive clinics led by financial experts and interact with CNBC talent and other subscribers. Tickets are limited for this inaugural event on June 12.

Read more: Powell indicates tariffs could pose a two-pronged policy challenge for the Fed