In his recent comments, US Federal Reserve Chair Jerome Powell has highlighted the challenges faced by the central bank in balancing its dual mandate of price stability and maximum employment, particularly in light of the escalating global trade war. Powell warned that increasing tariffs could lead to inflation while stifling economic growth, making interest rate decisions more complicated.
Despite the growing tensions, Powell emphasized that maintaining price stability remains the Fed’s top priority, as stable prices are essential for achieving sustained economic growth and strong labor market conditions. While Powell did not provide a clear signal on future policy adjustments, he indicated that the Fed is waiting for greater clarity before considering any changes.
Following Powell’s comments, Wall Street saw a selloff, with major indices dropping and the US dollar weakening. Gold prices surged to new record highs as investors sought safe havens amid the uncertainty. Powell’s remarks came ahead of the European Central Bank’s monetary policy decision, where the ECB is expected to cut interest rates for the third time this year to support growth in the face of global trade tensions.
While the eurozone faces its own challenges in adjusting policy, particularly with easing inflation and a surging euro, a dovish tone from the ECB could potentially limit the euro’s recent gains against the dollar. Investors are closely watching both central banks’ decisions and their impact on global markets amid ongoing trade uncertainty.
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