Federal Reserve Chair Jerome Powell warned that the US economy could experience a slowdown in consumer spending as businesses grapple with heightened uncertainty stemming from policy changes being implemented by the Trump administration, according to remarks delivered at an economic forum in New York City.
Powell identified four main areas of policy shifts creating uncertainty: trade, immigration, fiscal policy, and regulation. He stated the Fed intends to avoid making hasty decisions about interest rate reductions and will instead await greater clarity on how these policy changes will influence economic conditions. The central bank chief emphasized the importance of distinguishing meaningful economic signals from temporary market noise as conditions continue to evolve.
Despite the uncertainty, Powell noted that fundamental economic indicators remain sound. The government reported job growth of 151,000 in February, with the economy adding an average of 191,000 jobs monthly since September. On inflation, Powell indicated that while some near-term inflation expectations have risen, most longer-term expectations remain aligned with the Fed’s 2% target.
Powell’s comments came during a period of market volatility triggered by Trump’s tariff announcements, which included steep increases on Mexico and Canada followed by implementation delays, as well as doubled tariffs on Chinese imports. He acknowledged that the full effects of these developments on future spending and investment remain unclear.
The Fed is expected to maintain its benchmark interest rate in the 4.25%-4.50% range at its March policy meeting, when it will also release updated economic projections reflecting conditions from the first two months of the new administration. Market participants have begun pricing in expectations for three quarter-point rate cuts by year’s end.
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