The current stance of policy is "well positioned' to respond in a timely manner if the central bank needs to act, Federal Reserve Chair Jerome Powell said at his post-decision press conference on Wednesday after the central bank kept its policy rate unchanged at 4.25%-4.50%.
The Fed "is well positioned to wait" to learn more about how the economy unfolds before acting, he said.
Tariffs are likely to boost prices, but the Fed chair said the effects could be short-lived. Still, there are also scenarios, where their effects on inflation could be more persistent.
The economy is in a solid position, he said. However, a surge in exports complicated the measurement of GDP in Q1 2025, he said.
Inflation has eased significantly in the past couple of years but remains "somewhat elevated" to the Fed's 2% goal.
Most measures of longer-term inflation expectations remain consistent with the Fed's 2% goal, even though some measures of near-term inflation expectations have increased.
The policymakers kept their projections for rate cuts unchanged at a median of two 25-basis point cuts in 2025, but increased the expected terminal rate, seeing the fed funds rate at 3.4% at the end of 2027, rather than the 3.1% they expected in the March Summary of Economic Projections.
Event concludes at 3:21 PM ET.
3:19 PM ET: "It's a pretty good labor market," Powell said. The level of job creation has slowed, but so has the number of workers coming into the labor market. "The U.S. economy has defied all kinds of forecasts that it will weaken." It's harder to find a job, but few people are being laid off, he added.
3:17 PM ET: From a geopolitical, trade and immigration standpoint, it's a "time of real change," but it doesn't change how the Fed does monetary policy, he said.
3:15 PM ET: Generally, geopolitical shocks to energy prices doesn't persist for long, Powell said. The U.S. is less reliant on oil from the Middle East than it was in the 1970s and 80s, he said.
3:11 PM ET: "Having really good data about the economy is a public good," he said. "It's a real benefit to the public." Powell would want the U.S. to keep investing in the data it collects for the good of the general public. He said the Fed can do its job with the data it currently gets.
3:07 PM ET: "We're going to find 10% of employees who can do something else" over about two years, Powell said, in the Fed's effort to be a good steward of public resources. "This is something you do very carefully, thoughtfully, with a lot of planning, and you do it over a period of time. The Fed is effectively wiping out 10 years of headcount growth," he said. It won't affect mission-critical functions.
3:04 PM ET: "Monetary policy has to be forward-looking," he said. "The labor market is not crying out for a rate cut."
3:01 PM ET: Fed policy is "modestly restrictive," and needs to be kept there to bring inflation all the way down to the Fed's 2% goal, Powell said.
2:58 PM ET: The Fed will evaluate its communications and its Summary of Economic Projections in its five-year framework review. The Fed will only implement changes that have very broad support, he said. Still, he thinks the central bank's communications are well-received, overall.
2:57 PM ET: Asked about the impact of the administration's stricter immigration policy, Powell said that with less immigration, the labor supply will diminish.
2:55 PM ET: "Everyone wants a good, strong economy... The economy has been resilient. That's what matters — that's all that matters," he said when asked about insults that President Donald Trump has lobbed at him and the Fed.
2:53 PM ET: "We expect a meaningful amount of inflation from tariffs in coming months," Powell said. That's why the FOMC hasn't moved policy to a more neutral stance.
2:51 PM ET: "We have a healthy diversity of opinions," but there was "strong support" for the Fed's rate decision today.
2:49 PM ET: "We feel like we're going to learn a great deal more" about the effects of tariffs over the summer, he said. "We need to see actual data to make better decisions."
2:47 PM ET: No one is holding these rate paths "with great conviction," Powell said, citing the level of uncertainty in the economy.
2:46 PM ET: One could argue the labor market has seen "a slow, continued cooling," but it's still relatively healthy, he said.
2:44 PM ET: Tariff uncertainty peaked in April and has come down since then, Powell said. However, uncertainty on the economic outlook is still elevated.
Updated at 2:41 PM ET: The magnitude and duration of the effects of tariffs on prices are still "highly uncertain," he said. That's why the policymakers prefer to wait before adjusting the fed funds rate.
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