Powell says Fed is not in a hurry to adjust interest rates amid uncertainty in Trump's policy

Fed Chairman Jerome H. Powell said the central bank’s focus is President Trump’s “net effect” on uncertainty over what policies actually formulated, as he reiterated that officials are still not in a hurry to adjust interest rates.

“With the incoming message, we focus on separating the signal from the noise as the prospect develops,” Powell said at an event on Friday. “We don’t need to rush and can wait well for a clearer look.”

The Fed chairman said that if inflation remains sticky but the economy remains strong, central banks can “maintain longer policy restrictions.” But if the labor market is to weaken beyond expectations, or inflation drops rapidly, Mr. Powell said officials could “develop policies accordingly.”

His comments highlight the delicate balanced behavior of the Fed trying to navigate during difficult times of the economy.

In an interview Friday, Austan D. Goolsbee, chairman of the Chicago Fed and a voter on this year's policy-making committee, warned that inflation remains sticky while growth is at the same time lowering growth will be a “difficult problem” the Fed solves, and that is an increasingly problem that is increasingly “on the radar screen” which is Mr. Trump's scope.

“Tariffs for intermediate goods are negative supply shocks,” he said. “If there is a huge negative supply shock hitting the economy, they will tend to lower employment and raise prices.”

“That's a scattered urge,” he later added. “There is no universal answer to what you should do.”

Fed Governor Michelle Bowman, speaking at the same event earlier Friday, said labor markets and economic activity “will be bigger factors” as inflation returns to the central bank’s 2% target.

The Fed is expected to stabilize interest rates at 4.25% to 4.5% when it gathers from March 18 to 19, extending the pause it has been staying since January. But the decisions afterwards may become more fulfilling, especially if the economy is weakened and price pressures rise to the point where economists fear.

How will Mr. Trump's tariffs affect the economy. The president has paid a huge tax on his taxes in Mexico and Canada this week, but has maintained the threat only through short-term probation. The full retaliatory tariffs are still on the table, as are other penalties for aluminum, steel and other products. The scale of the potential impact depends not only on the duration of the policy, but also on how other countries protect themselves through retaliation measures and how businesses and consumers adapt to higher costs.

The Fed has to consider other policies Mr. Trump is pursuing, including massive deportations and huge cuts to government spending, which is expected to delay growth. Tax cuts and deregulation efforts that form another part of the president’s economic agenda may be objectionable and help enhance business activities, but to what extent is unclear.

Some comfort to Fed officials is that the economy Mr. Trump inherits has a solid foundation. In fact, new data released on Friday showed that hiring remained stable in February as unemployment rose by 4.1%. This solidity could mean putting the economy into recession.

Nevertheless, volatility alone is enough to attract attention to the economic outlook and measures to track consumer sentiment are taken to show that Americans have deteriorated significantly. Many economists have also lowered their forecasts for growth, and policy makers have noticed it.

Mr Goolsbee said the background still looks “quite strong,” but he is increasingly hearing companies in the region hear “chills caused by uncertainty, especially with regard to business investments.”

Fed Gov. Christopher J. Waller added Thursday that the meters point to recent emotional and other “soft data” measures that suggest that “maybe things aren't that good in terms of the real economy.”

However, on Friday, Mr. Powell tried to raise a more positive tone, saying “the U.S. economy is in a good position despite rising uncertainty.” Meanwhile, emotional data “has been a good predictor of consumption growth in recent years.”

The growth panic is because Americans are also practicing at higher consumer prices, a toxic combination that will make the Fed's work more challenging.

In the absence of rapid enough to spot inflation problems in the pop era, and as price pressures in that episode continue to continue, the Fed should be careful not to make the same mistake again. Since Mr. Trump was re-elected, central bank officials have proposed a year-long forecast of inflation, and some have recently had direct links to the president's policies.

Mr Powell noted that consumers who raise expectations for inflation see tariffs as a “driver”, even though he emphasized that longer-term measures are more likely to indicate that inflation’s trajectory is “stable.” In a post-speaking discussion, he suggested that tariffs will eventually affect prices to some extent, but policy responses will depend on whether it is just a one-time increase or whether there is a series of shocks.

Mr Goolsbee expressed concerns about the frequent changes in trade policy that may eventually have problems. “The fact that multiple changes occurred in a short period of time also raises a question, is this a cost shock?”

Earlier this week, John C. Williams, president of the New York Fed and top ally of Mr. Powell, said he expected tariffs to raise inflation because he “filtered to the price paid by consumers.”

Even Mr Waller previously said the Fed could “scrutinize” the impact of tariffs, and he admitted on Thursday that the risk of recent taxation was “much greater than he initially expected.”

The latest beige book released by the Federal Reserve this week tracks economic conditions across the country, showing businesses helping it. Most of the 12 regions that make up the Fed system said they plan to raise prices due to tariffs, some even making the first move.

Against this backdrop, officials have been backed by Fed-holding companies that support tax cuts until more evidence shows that inflation is returning to central bank targets or unexpectedly weakening of the labor market.

Financial markets bet on these conditions to be met at a June meeting, reducing the Fed's interest rate by 0.75 percentage points this year.