The Fed: Fed’s Powell says trade disputes could turn out badly

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Senior economics reporter

Fed Chairman Jerome Powell

The Trump administration’s effort to lower trade tariffs could turn out badly for the U.S. economy, said Federal Reserve Chairman Jerome Powell on Thursday.

The disputes might end up with sustained “high tariffs on a lot of products and a lot of traded goods and services…[and] that could be a negative for our economy,” Powell said, in an interview with Marketplace.

“You can imagine situations which would be very challenging, where inflation is going up and the economy is weakening,” Powell added.

Alternatively, it would be a good thing if the Trump White House succeeds in its goal of lowering tariffs, he noted.

“It’s very hard to sit here today, and say which way that’s going,” the Fed chairman concluded.

In the interview, Powell said he was not concerned about political pressure from the Trump White House which nominated him.

Late last month, White House economic advisor Larry Kudlow has already warned the Fed to hold interest rates low, the first overt jawboning of the Fed by an administration since the early 1990s.

Read: It’s been decades since the White House has warned the Fed the way Kudlow just did

“Nothing has been said to me publicly or privately that gives me any concern about our independence,” Powell said.

“We do our work in a strictly nonpolitical way, based on detailed analysis….and we don’t take political considerations into account,” he added.

The Fed chairman said the economy “is in a really good place.” He cited the low unemployment rate and the rising participation rate. He said the Fed was “really close” to its 2% inflation target.

Powell admitted he would have expected wages to move up at a faster pace than they have, but said worker pay was increasing gradually.

Fed officials have raised interest rates twice this year and have penciled in two more moves.

Asked if he was worried the Fed might tighten too much too soon, Powell said the central bank was “returning rates to a more normal level.”

U.S. stocks didn’t move much in reaction to Powell’s interview. Year-to-date, the Dow DJIA, +0.91%  are up just 1%.

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