News Digest:

Federal Reserve Chair Jerome Powell reassured markets that the U.S. economy remains stable despite uncertainty caused by the Trump administration’s shifting trade policies. Speaking at the University of Chicago, Powell emphasized that economic fundamentals remain strong, and there is no urgency for immediate policy action.

However, businesses have reported difficulty planning due to trade-related unpredictability, while stock markets have responded negatively, with the S&P 500 losing post-election gains and the Nasdaq falling into correction territory. Consumer sentiment has also taken a hit, as reflected in the Conference Board’s Consumer Confidence Index decline in February amid inflation fears linked to tariffs.

The U.S. economy is showing mixed signals, with inflation remaining stubbornly high while signs of a slowdown emerge. Consumer spending unexpectedly declined in January, marking its first drop in nearly two years. The housing market has also weakened, with home sales and construction slowing. Meanwhile, job growth has remained resilient, allowing the Fed to pause its rate-cut cycle after three consecutive cuts in 2024.

Economists warn that the Fed could face a difficult dilemma if inflation rises while economic growth falters, a scenario known as stagflation. The central bank must decide whether to cut rates to avoid recession or maintain a restrictive policy to curb inflation, risking further economic weakness.

End Notes

Source: https://edition.cnn.com/2025/03/07/economy/fed-chair-powell-trump-economy/index.html