Despite the ominous record, the “temporary nature of a good ship” seems ready to sail again Fed.
Economic Forecast The central bank released on Wednesday It shows that while officials are inflation faster this year than previously expected, they also expect the trend to be short-lived. Outlook talks again “Temporary” inflation This caused a major policy headache for the Fed.
At his conference press conference, the chairman Jerome Powell Saying the current outlook is that any price increase from tariffs may be short-lived.
When asked if the Fed is “back to temporary again,” the central bank leader replied: “I think it’s a basic case. But, as I said, we really don’t know. We’re going to have to look at what’s actually going on.”
However, the prospect of the Federal Open Market Committee reached 2.8% in 2025, but quickly returned 2.2% in the following years, suggesting that officials would not expect tariffs to be a lasting burden.
“If sometimes, if this is temporary, sometimes it can disappear quickly through inflation, and if no action is taken, sometimes it can be done through inflation,” Powell said. “In the case of tariff inflation, this may be the case. I think it will depend on the tariff inflation rate passing fairly quickly and critically through good anchoring inflation expectations.”
Powell added that while sentiment surveys show some short-term inflation indicators have increased, measures based on market-based long-term expectations are good.
Worry about tariffs
The position is important in markets that worry that President Donald Trump’s tariffs could trigger a wider global trade war, which once again makes inflation a problem for the U.S. economy. Inflation seems to have entered this year, but the outlook is uncertain now.
Back in 2021, when inflation surpassed the Fed’s 2% target for the first time, Powell and his colleagues repeatedly said They expect the move to be short-livedcaused by common factors that affect supply and demand that will eventually disappear. However, inflation has been rising, eventually reaching 9% as measured by the consumer price index, and the Fed was forced to respond with a series of positive interest rate rises not seen since the early 1980s.
In a speech at the Fed’s annual Jackson Hole Summit last August Powell even jokes He told the attendees: “The temporary nature of a good boat is a crowded boat, and I think I saw some former crew members there today.”
The room laughed at Powell’s remarks, and the market on Wednesday didn’t seem to mind the temporary conversation. Stocks jumped when Powell spokeand Dow Jones Industrial Average Raising 383 points to 41,964 points is a wealth reversal in the market.
“‘For the time being’ is back, or at least a hint,” said Elyse Ausenbaugh, head of investment strategy at JP Morgan Wealth Management. “For me, the market reaction says investors are willing to believe that tariffs and other policies don’t create lasting inflationary pressures, and the Fed can stay in control.”
The Fed votes for Holding the benchmark interest rate Because it weighs the impact of Trump’s tariffs and fiscal policy. Additionally, Federal Open Market Commission officials said it could drop by two quarters this year, but Powell warns again The policy is not locked in, nor does it have any opinions on temporary inflation of tariffs.
“We’re going to watch everything very, very carefully. We won’t take it for granted,” he said.
