INSTANT VIEW-Powell says Fed to stay on hold until clarity on tariff impact

April 16 (Reuters) - U.S. economic growth appears to be slowing, with consumer spending growing modestly, a rush of imports to avoid tariffs likely to weigh on estimates of gross domestic product, and sentiment souring, U.S. Federal Reserve Chair Jerome Powell said on Wednesday.

For now, he said in remarks prepared for delivery at the Economic Club of Chicago, the Fed could keep its benchmark interest rate steady "to wait for greater clarity before considering any adjustments to our policy stance."

Repeating comments made earlier this month, the Fed chief noted that the impact of those and other policy changes "are still evolving," but likely to be "larger than anticipated."

MARKET REACTION:

STOCKS: The S&P 500 .SPX extended a decline and was down 2.15%

BONDS: US Treasury 10-year yield fell and was 2.7 bp lower on day at 4.2961%

FOREX: The dollar index =USD was down 0.6%

COMMENTS:

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY

"I think he is taking a very mainstream view of what these tariffs mean for both inflation and growth, one that is in opposition to how the administration has been portraying it. The administration has put forth the idea that it will create some transitory inflation that will quickly pass and that ultimately it will lead to even greater growth in the country. And I think that that isn't the view of most economists and apparently isn't the view of Powell at this point in time."

"As a person who many investors follow, he's suggesting that it is going to be potentially difficult economic times if the tariffs stay at these levels. Both in terms of inflation and in terms of growth. And I think that's something investors know. He's just highlighting it."

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA RESEARCH, PENNSYLVANIA:

“Powell is confirming what investors have been worried about, and that is the likelihood of slowing economic growth and more stubborn inflation as a result of the tariffs. Basically saying it's sort of still an open-ended situation.”

“He also said that don't necessarily rely on the ‘Fed put’, meaning: don't rely on the Fed to sort of bail us out of this situation. Maybe that was sort of an indication that, 'gee… we really don't have the safety net'.”

THOMAS HAYES, CHAIRMAN AND MANAGING MEMBER, GREAT HILL CAPITAL, NEW YORK

“(Powell) is saying inflation may not be transitory … and the market doesn’t like that because everything Powell has said about inflation since he’s been in power … has been wrong and he’s going to be wrong again, and he’s going to be rigid about being wrong and that’s why the market doesn’t like it.”

“He has no concept that the bigger risk is deflation if the trade war escalates, that’s not even in his lexicon of possibilities.”

“The market is saying he doesn’t get it, and what he doesn’t get is that while there is a tail risk that inflation remains elevated … he’s not acknowledging the other side of that tail risk, which is that growth can slow so much if this is extended that you have deflation and he’d have to cut aggressively. The fact he does not acknowledge the other side of the tail … is disappointing.”

TOM GRAFF, CHIEF INVESTMENT OFFICER, FACET, PHOENIX, MARYLAND

“Powell is between a rock and a hard place. Practically speaking, the Fed can't act proactively to stem any potential economic weakness, given that tariffs are likely to also cause inflation. They simply can't cut rates while inflation is on the rise. This is doubly the case given that inflation is already high.

“There is very real danger that inflation expectations become unanchored in this period. The public has already experienced very high inflation in the recent past, and now is going to experience another bout of inflation, even if it is temporary. If the Fed were to cut rates too quickly thereafter, it would risk appearing that the Fed no longer cares about price stability. That's not a mistake the Powell Fed is going to make.”

MARK MALEK, CHIEF INVESTMENT OFFICER, SIEBERT FINANCIAL, NEW YORK

"I think that Powell said exactly what I would have expected him to say. He finally acknowledged that tariffs will cause some kind of inflation this year, that it certainly can lead to a pullback in capital expenditure and an increase in unemployment. And that leaves the Fed in a very tricky position because of their dual mandate. They need to keep unemployment low and prices down, and now both sides of the coin are going the wrong way for the Fed. The problem is that there is no tool in Powell’s toolbox that deals with both. Of course, the market wanted to hear something different: that they are here to support the markets. He basically said we are not here to do that, it’s the market’s job to come up with the right pricing. He seemed unconcerned that the markets were volatile and down. This volatility will continue until the market knows what this tariffs policy really looks like.”

ART HOGAN, MARKET STRATEGIST, B. RILEY WEALTH MANAGEMENT, BOSTON

“We didn’t get off to a good start today, with the news of Nvidia’s writedown, and then Powell sounded more hawkish than he did in his last press conference, leaning into the argument that what is happening is going to push inflation higher. That’s all he needed to say and then it was ‘Katie, Bar the Door.’ I don’t think any traders stuck around to listen to anything else after that.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“He is basically saying hey, look, you know, tariffs could pose a challenge between controlling inflation and boosting growth.”

“It looks like first quarter growth is slowing down, consumer spending is moderating.”

“Powell’s saying what the market has been fearing all along. And it’s coming from the Fed chief, confirming all these things.”

"Gold is sky-rocketing. The S&P is dropping, the Dow and the Nasdaq are at the lows of the day.”

“Powell's comments are just confirming what the market has been fearing all along.”

ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, FAIRFIELD, CONNECTICUT

"The Fed is waiting to see where things go before they make any type of movement on rates, to see if inflation is going to be temporary or if it's going to be a one-time thing, to see how long these tariffs last and whether or not there's any kind of change to it."

"They, like everybody else in the market, are probably just as perplexed by the tariffs, the implementation of tariffs and the pullback and the pauses. And that's why they're having to wait this out, because if they move prematurely, they're afraid that they're going to add to the inflationary pressures."