Fed chair says central bank sees no risk of US stagflation

ISTANBUL

US Federal Reserve Chair Jerome Powell said Wednesday that the central bank does not expect to face stagflation in the economy, but is monitoring the situation.

"A stagnant economy want more stimulus, but an economy with more inflation want less stimulus. So, it puts the central bank in a hard place," Powell told the Senate Committee on Banking, Housing and Urban Affairs.

"We have warned of it, but it is not something that we are facing or that we expect to face," he noted.

Powell said the bank is monitoring conditions for stagflation, where slow economic growth and higher inflation are combined in the US economy.

The Fed chair noted that it is difficult to assess the effect of tariffs on inflation because there is not a lot of "modern learning" about tariffs.

On Tuesday, Powell stated that the bank is well-positioned to wait to learn more about the likely course of the economy before considering adjustments to the policy stance of the central bank.

Still, he said, increases in tariffs this year are likely to push up prices and weigh on economic activity.

In the economic projections announced after the Fed's meeting last week, the growth forecast for the US economy was reduced from 1.7% to 1.4% for 2025, from 1.8% to 1.6% for next year, while it was maintained at 1.8% for 2027.

The bank's inflation forecasts were raised to 3% from 2.7% for this year, to 2.4% from 2.2% for 2026 and to 2.1% from 2% for 2027.