Federal Reserve Chairman Jerome Powell said Friday that the central bank is in no rush to adjust interest rates, emphasizing that policymakers will wait to assess the impact of President Donald Trump’s economic policies before making any moves.
Speaking at the US Monetary Policy Forum, Powell pointed to ongoing changes in trade, immigration, fiscal policy, and regulation as sources of uncertainty, noting that “it is the net effect of these policy changes that will matter for the economy and for the path of monetary policy.”
Despite growing market expectations for rate cuts later this year, Powell reiterated that the Fed remains in a “wait-and-see” mode, stating:
We do not need to be in a hurry, and are well positioned to wait for greater clarity.”
Market expectations vs Fed’s stance
Traders have increasingly priced in rate cuts, with CME Group’s FedWatch gauge reflecting expectations for three quarter-percentage-point reductions by the end of the year, starting in June.
However, Powell’s remarks suggest the Fed is not committing to a preset path for monetary easing.
“Policy is not on a preset course,” Powell said. “Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.”
Fed Governor Adriana Kugler, speaking separately in Portugal, echoed Powell’s caution, citing “important upside risks for inflation” and saying it “could be appropriate to continue holding the policy rate at its current level for some time.”
Fed policymakers are expected to keep the central bank’s key policy rate unchanged at their March 18-19 meeting.
Economic data and inflation outlook
Powell noted that the US economy remains in a “good place” with a “solid labor market” and inflation moving back toward the Fed’s 2% target.
However, he acknowledged ongoing concerns over price pressures, stating, “The path to sustainably returning inflation to our target has been bumpy, and we expect that to continue.”
He also addressed the recent data indicating a rise in consumers’ near-term inflation expectations, but noted that “most measures of longer-term expectations remain stable and consistent” with the Fed’s 2% inflation target.
The Fed’s preferred inflation gauge showed 12-month inflation at 2.5%, or 2.6% when excluding food and energy, with sentiment surveys indicating growing concerns tied to Trump’s tariff policies.
Meanwhile, the latest jobs report showed nonfarm payrolls increased by 151,000 in February, slightly below expectations, while the unemployment rate edged up to 4.1%.
Powell characterized the labor market as “solid and broadly in balance,” highlighting that wage growth continues to outpace inflation, with average hourly earnings rising 0.3% in February and 4% year-over-year.
The remarks indicate that while the Fed is aware of market expectations for rate cuts, policymakers remain cautious, preferring to assess the full impact of Trump’s policies before making any adjustments to monetary policy.
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