Federal Reserve Chair Jerome Powell affirmed the central bank's stance on interest rates, holding them steady for the fourth consecutive meeting. This decision follows a great deal of outside influence, most notably ongoing pressure from President Donald Trump to lower rates. Powell's recent speech addressed the state of the economy, the labor market, and future monetary policy, providing insights into the Fed's current thinking. Despite Trump's criticism and calls for lower rates, Powell indicated that the Fed remains data-dependent, focusing on sustained economic strength and stable inflation.
Jerome Powell provided some telling clues as to the state of the Fed’s thinking on the labor market and the broader economy. He pointed out that the labor market is not showing any signs of weakness that would warrant a cut to the fed funds rate. In every response, Powell pointed to the resilience of the U.S. economy, particularly our economy’s ability to do the unexpected and greatest of things.
"The US economy has defied all kinds of forecasts for it to weaken, really over the last three years and it's been remarkable to see." - Jerome Powell
Powell claimed that the United States has been at the forefront in interpreting and assessing its unique economic circumstances.
The dot plot gives a sense of where policymakers see rates going. That would imply Powell and the rest of the Fed are expecting at least two cuts, or 50 basis points worth, by year end. This outlook is consistent with the projections released in March, indicating that the Fed is on course to stick to its dovish, or expansionary monetary policy stance. Powell is unshakeable in his faith that the U.S. economy will continue expanding. So, as he explained to us in this week’s podcast, he doesn’t foresee a serious economic slowdown anytime soon.
This is the fourth consecutive meeting at which the Federal Reserve has decided to make no change in interest rates. Jerome Powell’s uncompromising leadership has been crucial to this decision-making process. This decision arrives amidst persistent external pressures. President Trump has been very vocal in his opposition to Powell’s policies from day one. He calls on the Fed to cut interest rates to help boost the economy.
President Trump has ramped up his attacks on Jerome Powell, most recently calling him “too late Powell.” Trump has long called on policymakers, including Powell, to take drastic action on interest rates by slashing them to juice the economy.
The former president’s criticism went further than just policy disagreements. He claimed Powell incompetent. These invasive personal attacks reveal the staggering level of political pressure Powell is under as he makes consequential monetary policy decisions.
Jerome Powell’s comments on interest rates late last month sent shockwaves to every sector. The Fed’s decision on what to do about rates this time around rippled through the AI and RWA sectors as well. In the wake of Powell’s announcement, these sectors saw significant declines, with the AI sector down 4.8% and RWA down 3%.
The unchanged rates and Powell's cautious outlook reflect the Federal Reserve's commitment to balancing economic growth with price stability. As the world’s external pressures continue to build, the Fed is committed to remaining data-dependent and prioritizing long-term economic health.
