At the Economic Club of Chicago, Jerome Powell makes a cautionary speech.
Economic Outlook
Please consider the Economic Outlook of Jerome Powell on April 16, 2025.
Recent Economic Data
We will get the initial reading on first-quarter GDP in a couple of weeks. The data in hand so far suggest that growth has slowed in the first quarter from last year’s solid pace. Despite strong motor vehicle sales, overall consumer spending appears to have grown modestly. In addition, strong imports during the first quarter, reflecting attempts by businesses to get ahead of potential tariffs, are expected to weigh on GDP growth.
Surveys of households and businesses report a sharp decline in sentiment and elevated uncertainty about the outlook, largely reflecting trade policy concerns. Outside forecasts for the full year are coming down and, for the most part, point to continued slowing but still positive growth. We are closely tracking incoming data as households and businesses continue to digest these developments.
In the labor market, during the first three months of the year, nonfarm payrolls grew by an average of 150,000 jobs a month. While job growth has slowed relative to last year, the combination of low layoffs and lower labor force growth has kept the unemployment rate in a low and stable range. Meanwhile, the ratio of job openings to unemployed job seekers has remained just above 1, near its pre-pandemic level. Wage growth has continued to moderate while still outpacing inflation. Overall, the labor market appears to be in solid condition and broadly in balance and is not a significant source of inflationary pressure.
As for our price-stability mandate, inflation has significantly eased from its pandemic highs of mid-2022 without the kind of painful rise in unemployment that has frequently accompanied efforts to bring down high inflation. Progress on inflation continues at a gradual pace, and recent readings remain above our 2 percent objective. Estimates based on data released last week show that total PCE prices rose 2.3 percent over the 12 months ending in March and that, excluding the volatile food and energy categories, core PCE prices rose 2.6 percent.
Looking forward, the new Administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. Those policies are still evolving, and their effects on the economy remain highly uncertain. As we learn more, we will continue to update our assessment. The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth. Both survey- and market-based measures of near-term inflation expectations have moved up significantly, with survey participants pointing to tariffs. Survey measures of longer-term inflation expectations, for the most part, appear to remain well anchored; market-based breakevens continue to run close to 2 percent.
Monetary Policy
As we gain a better understanding of the policy changes, we will have a better sense of the implications for the economy, and hence for monetary policy. Tariffs are highly likely to generate at least a temporary rise in inflation. The inflationary effects could also be more persistent. Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored.
Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem. As we act to meet that obligation, we will balance our maximum-‑employment and price-stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.
Conclusion
As that great Chicagoan Ferris Bueller once noted, “Life moves pretty fast.” For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance. We continue to analyze the incoming data, the evolving outlook, and the balance of risks. We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses. We will continue to do everything we can to achieve our maximum-employment and price-stability goals.
Thank you. I look forward to your questions.
Speech Replay
Powell says Fed Focused on Ensuring Tariff Boost to Inflation Isn’t Long Term
Investing.Com reports Powell says Fed Focused on Ensuring Tariff Boost to Inflation Isn’t Long Term
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said in prepared remarks at the Economic Club of Chicago.
Powell’s comments come just a days after Fed Governor Christopher Waller said Monday if the impact of tariffs threatens a deep economic slowdown, then he would back a sooner rate cut even if it is accompanied by a jump in inflation.
“If the slowdown is significant and even threatens a recession, then I would expect to favor cutting the FOMC’s policy rate sooner, and to a greater extent than I had previously thought,” Waller said in a speech in St. Louis.
Gold Happy With the News
Gold is happy with the idea that the Fed might cut rates despite higher inflation.
It’s up $115 on the day as I type (12:53 PM Mountain time) to a new record high over $3,350.
GDPNow Estimate Rises on Retail Sales But Still Negative
Earlier today I noted GDPNow Estimate Rises on Retail Sales But Still Negative
The quarter is over but we still have about two weeks of data coming in.
Latest Forecast
- Nowcast: -0.1 Percent
- Real Final Sales: -0.4 Percent
Real Final Sales is the important number. The difference between the Nowcast and RFS is inventory adjustment that nets to zero over time.
However, I wonder about inventories looking ahead because of all the tariff front-running of parts and general merchandise from highly-tariffed nations.
Related Posts
April 16, 2025: Retail Sales Surge in March Led by Tariff Front-Running of Autos
Forecasters accurately predicted tariff front-running would accelerate durable goods sales.
April 15, 2025: A Trade War Debate, Who Has the Cards, the US or China?
Let’s discuss a pair of articles from ZeroHedge and Politico.
April 14, 2025: Trump’s Plan to Make Manufacturing Great Again in Pictures
The share of manufacturing employment keeps declining. What role did NAFTA play?
Please read the above post. It highlights the major problems with Trump’s promise to restore manufacturing greatness.
Sure would be enlightening if Mr. Powell gave some clue how he thinks tariffs affect inflation. His assertion isn’t a convincing argument. He has not explained how this affects money supply.
If you don’t stop and look around once in a while, you could miss it
Recent Economic Data:
– We will get to see the “Initial Reading” on first-quarter GDP in a couple of weeks.
> So Powell is getting His (everybody else too) very First Look at Q1 GDP, but it won’t be for a “Couple (2 or more) More Weeks”! So WHY is He speaking about “data in hand” when He doesn’t have any? So far, per “Powell’s Own Words” there is NO DATA to suggest anything, because it’s not even available yet, and won’t be for, at best, 2 weeks from now.
– Despite strong motor vehicle sales, overall consumer spending appears to have grown modestly.
> I wasn’t aware that we were experiencing “Strong Vehicle” Sales, because most of what I see and read is expressing the exact opposite. Maybe in Washington they are selling lots of new vehicles, because they are paid by Taxpayers, and always get bonuses, raises, stock options, tips etc. and all sorts of First Looks and privy to Data Leaks that they must draw their false conclusions on!
– In addition, strong imports during the first quarter, reflecting attempts by businesses to get ahead of potential tariffs, are expected to weigh on GDP growth.
> That’s strange? So businesses getting ahead of the “Price Increases” by getting ahead of the Tariffs, which are going to raise prices and exponentially in some cases we are being told. So by these Businesses getting ahead of the “Increases” it is going to weigh on GDP Growth? That makes “No Sense” and especially coming from Him. Isn’t it His Job to understand this simple logic? Isn’t He supposed to be able to read and report on facts and not His Personal Feelings?
– Surveys of households and businesses report a sharp decline in sentiment and elevated uncertainty about the outlook, largely reflecting trade policy concerns.
> No it doesn’t, and He Made That Up! There would be no reason to be concerned about something that hasn’t even taken place, and it will be many months before we can get, read, and understand the New Data!! Why would we be concerned about something we don’t know. Are He concerned about getting the Flu? Not living another Year? If it will snow tomorrow? What else is He Concerned about that is unknown, and Is He Making Decisions on this Unknown, Made Up BS in His Head? We need to know and understand His mental Capacity don’t we?
– Looking forward, the new Administration is in the process of blah, blah, blah… > Let’s NOT look forward, until we understand the Present, which you clearly don’t! Why would you look forward, when you have No Idea what even took place in the past. Slow Down! Can you please understand what you have in front of you, and Real Data, not thoughts of what it might be, or could be, or the craziest, what it Will Be!! Talk about an “Incompetent Fool”
Monetary Policy:
– Seriously???
> Conclusion: You can’t and shouldn’t have one on this topic, and at this point. It adds no value, it is all conjecture at best, and leads people in directions that are misleading and in many cases, out right False!!
– Thank you. I look forward to your questions.
> Why are You So Stupid?
What moron even appointed Powell to his position?
You meant “Reappointed” one would assume, as all the primary damage has been done over the past 3 Years.
“Joe Biden” in 2022 is your answer…
He is not in his lane; he is a barrister turned investment banker. Almost as bad as being a music major economic council chair. So much for consent of the senate.
meaning BS
Oops didn’t he say the thing he wasn’t supposed to mention, out loud?
Powell should increase rates.
https://www.rt.com/business/615828-ruble-best-performing-currency-bloomberg/
Experts and highly educated academics predicted Russia’s collapse, including the ruble. They were dead wrong – and this should trigger great caution in predicting the outcome of America’s next (tariff) war.
Yeah, kinda makes you wonder about experts doesn’t it? Especially partisan experts.
The SEC will delist 286 Chinese companies listed on American exchanges with a total value of $1.1 trillion, Poof and it’s gone. Come to Jesus time. And if you ever wondered how long a Chinaman can go without food the experiment is underway.
This is what it looks like to play cards with Donald Trump when you are holding a pair of deuces:
https://www.youtube.com/watch?v=JBFcRowAU-o
A completely deranged thing to do.
The owners of those shares are Americans, our pension funds, mutual funds, other American corporations, both private and public.
Of course it would be absurd to conceive of this under a normal administration, but under trump?
Elections have consequences…
.
Aiding and abetting the enemy is a crime.
Than stop making enemies!
Trade when it is advantageous!
Export dollars for low cost goods that can not be made efficiently at home.
NYSE will have a problem listing any foreign company if it goes ahead with this.
“Chinaman?” Is that what you graduate to when you are no longer socially acceptable for calling them “Orientals?” What say you, Americaman?
I read an interesting point about goods from China. A lot of stuff is so unprofitable that they needed to dump it anyway. Look at things such as Temu. Some argue that tariffs may be doing China a favor – to concentrate on high margin goods and fade the cheap stuff. That and if 2% of China’s GDP comes from US exports, they just take the loss and come back in a year or so. I understand Goldman Sachs has said something such as this.
I’ve got some good stuff from Temo. And some junk products. If you buy anything for under US$5, you’ll probably be unhappy.
Trump is not smart enough to know that when the economy is strong and corporations are making money they pay more in taxes and can tolerate higher tax rates. This is an efficient way of collecting taxes and dealing with the deficit.
The notion of using tariffs to collect taxes and regulate where American corporations build their products is highly inefficient and our deficits will grow under trumps poorly thought out tariff threats/chaos.
Additionally the massive loss of equity in the equity markets reduces spending, job creation and wealth effect spending. This in turn reduces tax revenue. Pension plans are hit as well as life insurance returns and annuity performance.
Tariffs have a long history of slowing trade, creating more debt and even higher deficits.
Whose side is trump on?
JD Vance definitely will cut debt and will be a party breaker to stop congress petty projects and the speculators.
I’ll stick with Bessent, who is an absolute savage, rather than Jerry the Water Boy.
Bessent knows everything there is to know about currency manipulation. He has visited the US Treasury trading desk and told them what to do and how to do it.
Absolutely.
Savage? Like Goebbels?
We do not need savages, we need statesmen and men with wisdom and experience at the helm.
Hey it’s snowman! Bessent traded for Soros when he broke the British Pound. He’s as plugged in, experienced and knowledgeable in global finance as anyone. Now back to the darkness of ignorance you go.
Soros was one of your enemies before – because of his political actions – now you approve of him and boast that your man is his peer?
TDS 2 has you in its grips…
Do you really think America should isolateitself. Sounds so simple to go to war against anyone that does not echo what you want to hear.
Build the factories and move the manufacturing here because it is more economical! Do not make all Americans pay for a sudden inefficient destabilization of the world economy and hope for the best.
Massive political over reach by trump and his minions who do not care about the rule of law, the constitution or even the Supreme Court.
let’s sincerely hope Bessent gets his comeuppance this time round.
Daily trillions of inflation issued to bolster up the unearned assets and positions of the elite, while the peons need subsidies just to eat.
Gold has supplanted the Mag 7 as the most crowded trade on wall street and is going parabolic, and dare I say forming a bubble. It’s the Grandma wants in phase. We could quickly see 4k or even 5k.
I agree with your general outlook, but
any Gold miners and junior gold miners in corporate 401k mutual fund choices?
Not by a long shot / never. Whatever gold and silver do on the upside it will be in spite of Wall Street.
In reviewing a firing of agency heads by Trump, The US Supreme Court will be revisiting Humphrey’s Executor, a 1935 case which affirmed that independent agency heads could remain in place (with a president’s removal of them, once in place, only for just cause). If the Humphreys precedent falls, Trump can, in theory, possibly fire any Fed chief at will, and nominate another. If so, he can keep firing them until he gets a compliant one. Trump could thus unhinge the federal debt, the global foundations of treasuries, and the dollar itself. Has the shown the capacity to NOT pull any lever he can reach? We are seeing disruptions of a similar magnitude, already, in all kinds of spheres.
… and once the clown car is completly filled, we can get this clown show on the road.
It’s like having a toddler with a machine gun in the White House!
Can’t wait for companies who front ran the inventory to then charge post tariff prices to consumers to max out their margins.
Trump can always impose all sorts of regulations on them, or he can exact a personal vendetta on them.
People miss this. Price isn’t determinied by cost of inputs, it’s determinied by what the customer can and will pay. If a Toyota goes up 10k, its equivalent Chevy is going up 10k.
The Fed might cut rates in 2026 to ease gov debt. The Fed will stay the course until new data will force them to raise rates. Higher tax collection and tariffs along with lower rates will enable the gov to cut debt. A good manager, following Trump footsteps, can make America great again, When the whiners and the pukers realize that they benefit from what Trump sow, speculating, cheering, herding together ==> sell your stocks, before cholera spread.
So I guess inflation and yet more debt everywhere, by your “logic,” doesn’t matter?
My bet, looking forwards, not at the rear mirror, based on TA only: SPX will be in a trading range at list until Q3/ Q4 2025 (Since Oct/Nov 2021). The Fed will cut rates after a few Qt down. Thereafter SPX will rise for several years. The first stopping action will come when the Fed raise rates, but that will not stop the cheering speculators. Lower debt, along with higher inflation and more momo speculators pouring in, by the of a decade, will force another stopping action to stop SPX vertical rise and before the spread between the rich and the poor will be too high ==> that’s when the music stops. Option #2: SPX might rise exponentially without a few Qt down, without rates cut.
People are no longer sure that US bonds are safe, under the present leadership, or whatever koo koo nutbar we decided to elect next. We are no longer viewed as a rational country, and never will be again.
“ Higher tax collection and tariffs along with lower rates will enable the gov to cut debt.”
In the first 4 months of the current fiscal year, the US government collected $2.26 trillion in taxes, ss, medicare, tariffs etc. . Tariffs were 0.03 trillion of that total. Spending was $3.039 trillion. The deficit was $840 billion. We cannot reduce the debt till we start to run a surplus.
Trump says we are collecting $2 billion per day in tariffs. The US Customs and Border Patrol says it’s actually $250 million per day. (Just 1/8 of Trump’s claim).
I’m thinking trump will run a $3.5 trillion deficit at a minimum.
How many times he lies is an open question???
“One shipyard in China made more commercial ships in 2024 than the total number the US has produced since World War II. The destruction of America’s industrial base is a massive national security threat.”
Our abilities have eroded across the board because we chased a cheaper screwdriver. We kick ass in one area: Software along with a thin veneer of hardware. But everything else we’ve let erode to almost nothing.
https://cdrsalamander.substack.com/p/so-does-chinas-shipbuilding-capacity
J.Powell wouldn’t spot inflation if it hit him in the rear.
Decades of monetary suppression created everything bubbles with the most unstable financial conditions from which there is nowhere to hide.
It takes some thick skin to point fingers in other direction, which he was instrumental creating.
You have never lived with seriously unstable financial conditions … but Trump will make it possible for all of us to get a first-hand experience what happens when the financial system turns upside down.
Gold is getting the message, loud and clear.
Powell said: “We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension.”
Translation: “We are all f—-ked.”
Except he put it in words that a mere 25% of Trump voters can actually understand
The dual mandate is incompatible and always was. Powell is a slow learner. A Federal Reserve Chairman with a room temperature intellect and modicum of integrity would have said so. That tells you everything you need to know about the Federal Reserve and its chairmen past and present.
J.Powell was hired to augur the entrails of a goat and fund the US government deficit. Anything he says about the goat is inconsequential.
An a 100 billion dollar increase to a trillion in annual defense, er, discretionary Dept. of War spending with failed programs (f35), failed audits, and no optional war wins with a monopoly of aircraft carriers or Love Boats—the southern border fight pending with over 40 million aliens still roaming the interior. So much for DOGE or typical doggie time in the district of criminals and Nato for the last 70 years. . .
“Inflation is always and everywhere a monetary phenomenon.”
Anyone on Wall Street and the poor hedge funds crying when Powell turned on the spigots full-blast during Covid Theater 2020 – 2022 ?
Hope you arent quoting Milton Friedman cause hes already been disproved.
Powell better institute any rate bumps prior to his term ending on May 15, 2026.
Fateful that this is before the midterm elections.
WIN (Whip Inflation NOW) buttons are going up in price – check Ebay and Etsy. . .I wish I still had mine! Stagflation is here again. Powell NOT to the rescue.
It is only a question of when powell succumbs to the pressure of trump’s “bad breath.”
Even in silence, he B.O. is something to contend with.
Faulty seasonal adjustments.
Rates are going to zero no matter what Midnight says. 🙂 Trump is nearing his dictatorial zenith (just has to defund the courts and nothing will stop him), he hates taxes of all kinds, he wants to instead borrow $5 trillion more in addition to the $36 trillion we are already in hock, in addition to “helping his people” continue to buy up America with free/0% money. The Fed will do what they are told in the end.
Rates can’t go to zero. The Federal deficits are too large. And the percentage of demand to time deposits has risen, i.e., AD, the trend rate, has risen.
From 2008 to 2022 we had zero percent rates. And remember, when the rates go to zero, the face value of bonds goes up — no one with bonds is losing money. No one wins except the Lords and Ladies who will become our new overlords as the estates are established (we all rent and work for food) in the new Feudal American system.
low rates are good for debtors like the US govt
And theoretically they are very good for increasing inflation.
They can if we print the money to buy bonds with… but no sane person would do that….