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the staff of the Ridgewood blog
Chicago Il, Federal Reserve Chairman Jerome Powell issued a cautious economic outlook on Wednesday, stating that the central bank will “wait for greater clarity” before considering any changes to interest rates. His comments come amid rising concerns that President Trump’s tariffs may fuel both higher inflation and slower economic growth, creating a policy dilemma for the Fed.
Speaking at a conference in Chicago, Powell acknowledged that the Federal Reserve’s dual mandate — maintaining price stability and maximizing employment — may come under pressure if the economic impact of the trade war deepens.
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell said.
Market Reacts to Fed Uncertainty
Following Powell’s remarks, U.S. stock markets turned sharply lower, as investors weighed the implications of tariffs, slowed growth, and a potential delay in monetary policy moves.
The prospect of higher consumer prices and sluggish hiring puts the Fed in a bind: raising interest rates could cool inflation but stifle job growth, while cutting rates may encourage employment at the risk of escalating price instability.
China Responds to Tariffs, Signals Openness to Talks
Meanwhile, China has shown some willingness to resume trade negotiations with the United States. Chinese officials reportedly remain open to talks under certain conditions — including respect, consistency, and a designated U.S. point person — as tensions over tariffs escalate.
This response comes despite the White House reaffirming that Chinese goods now face up to a 245% tariff when imported into the U.S., marking one of the highest tariff levels in decades.
Chinese state media downplayed the significance of the rising tariff numbers, insisting the country would not participate in a “numbers game.”
Michelle Lam, Greater China economist at Société Générale, told Bloomberg:
“Beijing wants a stable negotiation framework — respect, consistency, and a clear point person. That’s how progress will happen.”
What’s Next for the Fed and Global Markets?
Powell’s wait-and-see approach suggests that the Federal Reserve will remain cautious amid the economic uncertainty. While no immediate changes to interest rates are expected, future moves will likely depend on how the trade conflict plays out in the coming weeks.
Investors, economists, and policymakers around the globe will be watching closely as U.S.–China relations, inflation trends, and employment data develop — all of which could shape the Fed’s next steps.
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