U.S. Federal Reserve Chair Jerome Powell said on April 4 that he expects President Donald Trump’s tariffs to raise inflation and lower economic growth in the months ahead.
However, the central bank leader also stressed that there isn’t likely to be any moves on interest rates until the Fed gets a clearer picture on the impacts Trump’s tariffs have on the American economy. In a speech delivered to business journalists, Powell said the Fed faces a “highly uncertain outlook” because of the new tariffs Trump announced in recent days.
In prepared remarks, Powell emphasized that the Fed will remain focused on keeping inflation inline with its 2% annualized target. “Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” he said.
Core inflation in the U.S., which excludes volatile food and energy prices, was at 2.8% in February, above the Fed’s 2% target.
Presidential Interference
Powell delivered his remarks in Arlington, Virginia as Trump called on the Fed chair to “stop playing politics” and cut interest rates immediately. Trump has repeatedly called on the central bank to lower interest rates and spur economic growth, as well as a rally in the stock market. Powell has consistently asserted the Fed’s independence from political influence.
The speech by Powell also comes as global stock markets continue to selloff, with the benchmark S&P 500 index down another 5% on April 4 and the Nasdaq Composite on track to fall into a bear market, defined as a drop of 20% or more from recent highs.
Futures traders have raised their expectations for rate cuts, pricing in five reductions from the Fed this year as the U.S. economy slows. That’s up from just two interest rate cuts that were forecast at the end of March this year.
Is the Vanguard S&P 500 ETF a Buy?
The Vanguard S&P 500 ETF (VOO), which tracks the movements of the benchmark U.S. stock index, has a consensus Moderate Buy rating among 506 Wall Street analysts. That rating is based on 410 Buy, 88 Hold, and eight Sell recommendations made in the last three months. The average VOO price target of $668.21 implies 41.67% upside from current levels.
