Fed Powell: Tariffs may disrupt chip and automotive supply chains, and restrictions on crypto assets will be relaxed in the future

U.S. Federal Reserve (Fed) Chairman Jerome Powell (Jerome Powell) on 4/17 to talk about current economic data, tariff policy, the job market, and the impact of AI on U.S. finances. In the face of rising price pressures and rising potential unemployment due to the trade war, Powell said that it may be difficult to take care of "maximum employment" and "price stability" at the same time this year. But when it comes to cryptocurrencies, he noted that Congress is finally facing up to stablecoin legislation and that the Fed will ease bank restrictions on crypto assets.

Price pressures continue, unemployment is feared to rise, and the economy may deviate from the Fed's targets

Powell began: "At present, almost everyone in the United States has jobs, and inflation has eased, but it is still slightly higher than the 2% target set by the Fed."

However, he also warned: "The new government's trade and fiscal policies are on the way, but they are not clearly working." Tariffs are expected to boost inflation and slow growth." Here are the latest figures released by Powell:

2.4% economic growth in 2024 with unemployment below 4.2%

Current inflation PCE growth rate of 2.3% per year, core prices 2.6%

Job growth in the first quarter averaged 150,000 per month

Whether tariffs will immediately push up prices, Powell analyzed three major risks

As for whether the "tariffs" will continue to push up prices, Powell gave three major risks:

Larger than expected: The tariffs are now larger than the Fed expected

The impact period may be extended: tariffs will not make things more expensive immediately, but if they drag on for too long, the easier it is for manufacturers and consumers to get used to high prices, and inflation may stick to it

Inflation expectations will be rewritten: once people start expecting prices to rise, it may have a chain reaction

Tariffs could disrupt supply chains, with Powell saying the auto industry is bearing the brunt

Powell cited the lack of chips during the epidemic period, which led to the inability to buy cars and skyrocketing prices. And now because tariffs prevent parts from coming in, the supply chain may be disrupted and exacerbate price increases.

He added that there are already reports that the supply chain is about to be disrupted and the repair process will take several years.

Cars and chips are inseparable The labor market is stable and under pressure, the immigration fault line, and the scientific research budget are shrinking and fermenting

Although the simultaneous decline in corporate demand has made the job market appear stable, Powell said: "Labor supply growth has basically stagnated, which is not a long-term solution."

On the other hand, the wave of layoffs in scientific research is also spreading, and researchers in some cities in the United States are already facing unemployment.

In the face of high unemployment and high inflation, how can the Fed solve it?

Powell admitted that this is the last thing the central bank wants, saying that the Fed's interest rate tools can only solve one problem at a time.

If there is really "double pressure" in the future, it will be weighed:

Which one is farther off target

Which one will take longer to recover

Which one affects the people the most

The market is volatile, whether the Fed will come to the rescue

Will the Fed bail out? Powell positively denied: "Market volatility reflects policy uncertainty, and does not mean that a bailout is needed." As long as the market operates in an orderly manner, we will not intervene."

The national debt problem is imminent, and the United States is on an unsustainable path

On the issue of US national debt, Powell said bluntly: "At present, the debt is not so bad that it is out of control, but the direction is wrong, and the sooner it is dealt with, the better." He stressed that real fiscal pressures are:

Social Security (Social Security)

Health care expenditure (Medicare / Medicaid)

Interest expense

But politicians focus on "discretionary spending" such as education and scientific research, which account for a small proportion, and ignore the above three expenditures.

Commercial real estate, private equity credit expansion, whether the financial system can sustain

Powell said that the overall banking system has sufficient capital and liquidity, but some real estate exposures of small and medium-sized banks still need to be dealt with.

As for the non-bank "private credit" market expanding at an alarming rate, it has not yet experienced a major economic shock, and the Fed is monitoring it closely.

Powell said Congress is finally moving and there is hope for stablecoin legislation

In the past few years, due to frequent fraud and bankruptcy cases, stablecoin regulations have been difficult to produce. In this regard, Powell said that Congress has finally moved again, and the Senate and House of Representatives are working on a stablecoin bill.

He also revealed that the Fed may ease restrictions on banks' involvement in crypto assets in the future, but will retain the consumer protection and financial stability framework.

Whether AI is an opportunity or a threat, Powell called it the most shocking change in the next 20 years

Speaking of AI, Powell said that this is not an enhanced version of Google, but an enhanced version of humans, and believes that there are two possibilities for coexistence in the future:

AI improves human productivity and living standards

AI is massively replacing manpower, triggering structural unemployment

He can't tell which way he will go at this time.

Whether independence can be preserved, Powell bluntly said that Congress can support the system

Finally, Powell promised: "We will not let any political pressure influence our judgment, we will only make decisions based on data and analysis." He said the Fed's independence is guaranteed by law, cannot be arbitrarily fired, and has broad bipartisan support in Congress.

At the end of the speech, Powell confidently said that the Fed still has full independence

This article Fed Powell: Tariffs may disrupt chip and automotive supply chains, and will relax crypto asset restrictions in the future First appeared in Chain News ABMedia.