Tariffs Are Pushing Up Some Prices, Powell Says

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00:00In this less dynamic and somewhat softer labor market, the downside risks to employment appear

00:04to have risen in recent months. Inflation has eased significantly from its highs in mid-2022,

00:12but remains somewhat elevated relative to our 2 percent longer-run goal.

00:17Estimates based on the Consumer Price Index suggest that total PCE prices rose 2.8 percent

00:23over the 12 months ending in September, and that excluding the volatile food and energy categories

00:30core PCE prices rose 2.8 percent as well. These readings are higher than earlier in the year,

00:37as inflation for goods has picked up. In contrast, disinflation appears to be continuing for services.

00:44Near-term measures of inflation expectations have moved up on balance over the course of this year

00:48on news about tariffs, as reflected in both market and survey-based measures. Beyond the next year or

00:55two or so, however, most measures of longer-term expectations remain consistent with our 2 percent

01:02inflation goal. Our monetary policy actions are guided by our dual mandate to promote maximum

01:09employment and stable prices for the American people. At today's meeting, the Committee decided

01:15to lower the target range for the federal funds rate by a quarter percentage point to three and

01:21three quarters to four percent. Higher tariffs are pushing up prices in some categories of goods,

01:27resulting in higher overall inflation. A reasonable base case is that the effects on inflation will be

01:34relatively short-lived, a one-time shift in the price level. But it is also possible that the inflationary

01:40effects could instead be more persistent, and that is a risk to be assessed and managed. Our obligation is to

01:48ensure that a one-time increase in the price level does not become an ongoing inflation problem.

01:55In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside.

02:01A challenging situation. There is no risk-free path for policy as we navigate this tension between our

02:08employment and inflation goals.