Washington: US Federal Reserve Chair Jerome Powell stated on Wednesday that the central bank does not anticipate stagflation within the economy, although it remains vigilant in monitoring the situation. Powell addressed the Senate Committee on Banking, Housing and Urban Affairs, expressing the complex position the central bank faces when dealing with a stagnant economy that demands more stimulus, contrasted with inflationary pressures that require less.

According to Anadolu Agency, Powell emphasized that while the threat of stagflation is on the radar, it is not currently a scenario that the US is experiencing or expects to encounter. He highlighted the central bank's ongoing efforts to monitor economic conditions that could lead to stagflation, characterized by the combination of slow economic growth and rising inflation in the US economy.

Furthermore, Powell acknowledged the challenges in assessing the impact of tariffs on inflation, citing a lack of "modern learning" on the subject. He indicated that recent tariff increases are expected to elevate prices and potentially hinder economic activity.

Earlier, Powell had conveyed that the Federal Reserve is strategically positioned to await more information regarding the economy's trajectory before making any adjustments to its policy stance. Despite this cautious approach, the Fed has made adjustments to its economic forecasts following its recent meeting. The growth forecast for the US economy for 2025 has been revised down from 1.7% to 1.4%, and from 1.8% to 1.6% for the following year. However, the growth rate for 2027 remains steady at 1.8%.

In terms of inflation projections, the Federal Reserve has increased its forecasts, raising this year's rate from 2.7% to 3%, and adjusting the 2026 forecast from 2.2% to 2.4%, while predicting a slight rise in 2027 from 2% to 2.1%.