(Reuters) -U.S. economic growth appears to be slowing, with consumer spending growing modestly, a rush of imports to avoid tariffs likely to weigh on estimates of gross domestic product, and sentiment souring, U.S. Federal Reserve Chair Jerome Powell said on Wednesday.
For now, he said in remarks prepared for delivery at the Economic Club of Chicago, the Fed could keep its benchmark interest rate steady “to wait for greater clarity before considering any adjustments to our policy stance.”
Repeating comments made earlier this month, the Fed chief noted that the impact of those and other policy changes “are still evolving,” but likely to be “larger than anticipated.”
MARKET REACTION:
STOCKS: The S&P 500 extended a decline and was down 2.8%
BONDS: US Treasury 10-year yields fell on Wednesday by nearly five basis points and were last at 4.279%
FOREX: The dollar index was down 0.9%
COMMENTS:
JIM CARROLL, SENIOR WEALTH ADVISOR, BALLAST ROCK PRIVATE WEALTH, CHARLESTON, SOUTH CAROLINA
“People were expecting Powell to be neutral and he was hawkish instead. When asked if there’s such a thing as a Fed put for the stock market, his answer was ‘no’. Overall, at this point, we’re kind of drifting… I have a hard time interpreting anything these days except that we’re operating day-to-day on news flows. Obviously, a lot of people have been taking earnings expectations down as a result.”
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY
“He is taking a very mainstream view of what these tariffs mean for both inflation and growth, one that is in opposition to how the administration has been portraying it. The administration has put forth the idea that it will create some transitory inflation that will quickly pass and that ultimately it will lead to even greater growth in the country… That isn’t the view of most economists and apparently isn’t the view of Powell at this point.”
“He’s suggesting that it is going to be potentially difficult economic times if the tariffs stay at these levels. Both in terms of inflation and in terms of growth. And I think that’s something investors know. He’s just highlighting it.”
SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA RESEARCH, PENNSYLVANIA:
“Powell is confirming what investors have been worried about, and that is the likelihood of slowing economic growth and more stubborn inflation as a result of the tariffs. Basically saying it’s sort of still an open-ended situation.”
“He also said that don’t necessarily rely on the ‘Fed put’, meaning: don’t rely on the Fed to sort of bail us out of this situation. Maybe that was sort of an indication that, ‘gee… we really don’t have the safety net’.”
