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The Fed can keep the interest rate steady while waiting to see if tariff policy pushes up inflation, Powell said.
“Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” Powell said.
Powell said a “reasonable base case” could be that effects to inflation will be “short lived.” But he also cautioned that levies could cause inflationary changes that are “more persistent.”
“Our obligation is to keep longer term … inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem,” Powell said.
“For the time being, we’re well positioned to learn more about the likely course of the economy and the evolving balance of risks before adjusting our policy stance,” he added. “We see our current policy stance as appropriate to guard against inflation risks.”
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