US Federal Reserve Chairman Jerome Powell testified on February 11, 2025 at Capitol Hill, Washington, before a hearing with the Senate Bank, Housing and Urban Affairs Committee on “semi-annual monetary policy report to Congress.”
Craig Hudson | Reuters
NEW YORK – Federal Reserve Chairman Jerome Powell said Friday that he could wait to see how President Donald Trump’s aggressive policy action unfolds before the central bank moves again at interest rates.
As the market is nervous about Trump’s proposals on tariffs and other issues, Powell has reiterated a statement that he and his colleagues have recently counseled their monetary policy patience amid high levels of uncertainty.
The White House is “in the process of implementing major policy changes in four different areas: trade, immigration, fiscal policy and regulation,” he said in a speech at the US Monetary Policy Forum. “What is important for the economic and monetary policy pathway is the net effect of these policy changes.”
“There’s a high possibility of uncertainty about change and its effects,” Powell said the Fed “focuses on separating signals from noise as prospects evolve.”
The comments appear to be at least somewhat conflicted with rising market expectations for interest rate cuts this year.
According to CME Group’s FedWatch gauge, the market is setting prices at a price equivalent to a three-quarter percentage point cut by the end of the year.
However, Powell’s comments show that the Fed will go into standby mode before mapping further policy mitigation.
“Policy is not a preset course,” he said. “Our current policy stance is well set out to address the risks and uncertainties we face when pursuing both sides of our dual mission.”
The policy forum was sponsored by the Clark Global Market Center at the University of Chicago booth school, and included multiple Federal Reserve staff members in the audience. Most central bank policymakers have recently predicted that the economy will remain in place and inflation will fall back to the Fed’s 2% target, and the rate climate is still unclear as Trump’s policies are more clearly seen.
In his assessment, Powell also spoke mostly in positive terms about the macro environment, saying the US is in a “good place” where inflation returns to its targets.
However, he noted that recent emotional research showed anxiety about the path of inflation. It is mainly a product of Trump’s customs lectures. The Fed’s priority gauge showed 12 months of inflation running at a speed of 2.5%, or 2.6%, when food and energy were excluded.
“The path to bringing inflation back sustainable to targets is bumpy and we hope that continues,” Powell said.
Governor Adriana Kugler, who was not present in the forum, said in a speech in Portugal on Friday that “it would be appropriate to hold the policy rate at current levels for a while,” seeing “an important rise risk of inflation.”
The statement also came on the same day that the Labor Bureau reported a profit of 151,000 in non-farm pay in February. Although the total was slightly below market expectations, Powell said the report is evidence that “the labor market is solid and broadly balanced.”
“Wages are growing faster than inflation and are growing at a more sustainable pace than early in the pandemic recovery,” he said.
Average hourly earnings increased by 0.3% in February, up 4% per year. Employment reports also show that the unemployment rate has risen to 4.1% as household employment has become more widespread.
