Powell: Inflation proves sticky amid cooling jobs market; long-term inflation expectations anchored

Jerome Powell, chair of the US Federal Reserve (Fed), said the economy is seeing both a cooling in employment and persistent inflation at the same time.

Speaking at a Q&A-style event held at Harvard University on the 30th, Powell said, “While there are signs the labor market is cooling, inflation still appears to be sticky.” He added, however, that long-term inflation expectations are “well anchored.”

He pointed in particular to the impact of tariffs on inflation. “Tariffs have led to a modest bout of inflation,” he said, explaining that “in 2024, the trajectory was close to a soft landing, but inflationary pressure resurfaced afterward due to tariff policy.”

On monetary policy, he said the Fed can maintain its current stance. “Policy is in a good position to wait and see,” he said, adding, “We will bring inflation back to the 2% target.”

On balance-sheet policy, Powell cited past crisis responses. “There were instances during the 2008 financial crisis and the pandemic when, even after cutting rates, it was difficult to provide sufficient support,” he said, stressing the importance of preserving policy space.

Regarding financial markets, he referred to the private credit market. “Private credit still does not account for a large share of total assets,” he said, adding that “the Fed is in close communication with the industry and investors and is closely monitoring that market.”

He also said of the situation in the Middle East that “events in the region are affecting gas prices.”

Meanwhile, Powell said, “Over the medium to long term, (the economy is) very optimistic,” adding that “artificial intelligence (AI) is boosting productivity.”