What Did Powell Say?

Jerome Powell used both cautious and warning tones in his speech. The following statements were particularly striking:

• “The economic impact of tariffs is likely to be greater than expected.”
  This statement raised concerns that the recent rise in U.S. trade policies and signals of a more closed economy could cause more damage than anticipated.
• “Despite uncertainties, the U.S. economy remains resilient.”
  Although this may seem like a positive remark, investors focused on the emphasis on “uncertainties.”
• “We are not in a hurry to cut rates.”
  The market had been expecting a rate cut this year. However, these words disappointed investors hoping for near-term monetary easing.
• “If the Fed’s authorities come into conflict, we might face a difficult decision.”
  This statement reinforced the perception of growing internal disagreements or political pressure within the Fed.
• “Automakers’ supply chains will likely be disrupted for years.”
  This signaled that supply-side problems would persist, potentially making inflation more permanent.

Powell Spoke, Markets Reacted

Investors began pricing in more economic fragility alongside the Fed’s cautious stance. Powell’s remarks once again showed us that every word from a central bank chairman can trigger trillion-dollar swings in the markets.

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