Federal Reserve Chair Jerome Powell addressed the potential for 'more persistent' supply shocks amidst economic uncertainty stemming from factors like Donald Trump's tariff policies. Powell highlighted that the US central bankers met for discussions against this backdrop.

Powell noted that the US president's fluctuating approach to tariffs has introduced increased volatility in both US and global financial markets. The imposition of steep tariffs on China, coupled with retaliatory measures from Beijing, has raised concerns about potentially significant trade disruptions between the two countries.

In his address, which marked the beginning of the Fed's first public strategy review in five years, Powell stated that the economic landscape has shifted since the last meeting, when interest rates were considerably lower. He suggested that the economy might be entering a phase characterized by more frequent and persistent supply shocks, presenting challenges for both the economy and central banks.

The Fed's key lending rate is currently between 4.25 percent and 4.50 percent, as policymakers aim to curb inflation while managing unemployment levels. Powell noted that longer-term interest rates are currently higher, largely driven by real rates due to the stability of longer-term inflation expectations.

Powell also mentioned that these higher rates could reflect concerns about increased volatility moving forward. While the Fed might implement minor adjustments to its monetary policy approach, the long-term inflation target of two percent would remain unchanged. He emphasized that anchored expectations are crucial for the Fed's operations and reiterated their commitment to the two percent target.