Jerome Powell's Message: Stability and Data in Focus

While Jerome Powell is certainly not known for making bold statements, the Chairman of the US Federal Reserve is known for his consistency and data-driven approach. During an appearance before the Greater Providence Chamber of Commerce, he underscored these very qualities with a mix of dry professionalism and an occasional mischievous comment. Powell portrayed the US economy as resilient in the face of significant changes, but noted that the pace of growth has slowed. Private consumption has decreased, and the labor market has cooled down. The employment gains during the summer fell short of the stability mark, and the risk of employment declines increased. Businesses are holding back on investments and hiring activities due to economic policy uncertainties. According to Powell's statements, uncertainty about future US economic policy weighs heavily on business expectations, as evidenced by the Fed's latest Beige Book. These observations cover all regions. Tariffs, in particular, took center stage in his speech. While higher import tariffs do drive prices up, Powell described this effect as temporary, stretched over several quarters, and not as a genuine permanent acceleration. The impacts on the job market are more palpable, as companies use hiring caution as a form of cost-bearing. When asked about the flourishing stock market, Powell admitted that valuations appear exaggerated. Particularly, stocks in the artificial intelligence sector seem to support the market. However, he warned against premature conclusions about the disruptive nature of AI – it is still too early for such assessments. Nonetheless, he expressed optimism that innovation has traditionally been able to reduce inequality in American history. Consistently, Powell emphasized the Fed's goals: maximum employment and price stability. There is no risk-free path, he said, and the Fed always acts independently of political influences. Critics accusing the Fed of political actions are resorting to simplistic accusations; Powell's counter is that the Fed is simply fulfilling its mandate.