Powell Says Fed Can Wait For Data as Rates Stay Steady: Fed Special

Bloomberg's Tom Keene and Jonathan Ferro break down Fed Chair Jerome Powell's comments to reporters after the Federal Reserve elected to keep rates steady amid political turmoil. The decision is the first one since Powell was served a grand jury subpoena in connection with a DOJ investigation into the fed. Two members of the FOMC, Christopher Waller and Stephen Miran, dissented in favor of a quarter-point cut.

Federal Reserve officials left interest rates unchanged and pointed to improvements in the US economy as they signaled a more cautious approach to potential future adjustments.

The Federal Open Market Committee voted 10-2 Wednesday to hold the benchmark federal funds rate in a range of 3.5%-3.75%. Governors Christopher Waller and Stephen Miran dissented in favor of a quarter-point reduction.

In a post-meeting statement, policymakers said “job gains have remained low, and the unemployment rate has shown some signs of stabilization.” Officials also dropped language pointing to increased downside risks to employment that had appeared in the three previous statements.

The upgraded assessment of the labor market is likely to hold expectations for a near-term rate cut at bay, despite escalating pressure from the Trump administration. Heading into the meeting, investors saw another cut as unlikely until at least June.

Bond yields were largely unchanged with 10-year yields steady at about 4.25%. The dollar edged lower from the day’s high, which came after Treasury Secretary Scott Bessent touted a strong-dollar policy earlier. The S&P 500 was also little changed on the day.

In remarks to reporters after the meeting, Fed Chair Jerome Powell further talked up a “clear improvement” in what’s expected for the US economy in the year ahead.

“The outlook for economic activity has improved, clearly improved since the last meeting, and that should matter for labor demand and for employment over time,” he said.

The Fed chief reiterated that the labor market has shown signs of stabilizing, but added, “I wouldn’t go too far with that,” noting there were also signs of continued cooling.

He demurred when asked what it may take for the committee to cut again.

“We’re not trying to articulate a test when to next cut or whether to cut at the next meeting,” he said. “What we’re saying is we’re well positioned as we make decisions meeting-by-meeting, looking at the incoming data, evolving outlook and all that.”

Wednesday’s decision was widely expected after policymakers lowered interest rates at three consecutive meetings in the closing months of 2025. Based on rate projections issued in December, most officials see the Fed cutting again later this year. But given concerns over still-elevated inflation and signs of stability in the labor market, several policymakers recently indicated they saw no immediate need for an additional reduction.

Policymakers, in their statement, marked up their view of the economy, describing the pace of growth as “solid.” Since October they had said the economy was expanding at a “moderate pace.” They also dropped a reference to inflation having moved up.

On inflation, Powell said the overall story was “modestly positive,” despite his estimate that the Fed’s favored gauge of core price increases will likely end 2025 at 3%, a full percentage point above target.

But, he added, “most of the overshoot was in goods prices, which we think is related to tariffs, and ultimately, we think those will not result in inflation, as opposed to a one-time price increase.”

Political BackdropIn the opening portion of his press conference, Powell avoided answering most questions about the extraordinary political backdrop overshadowing the central bank, including questions about the Department of Justice’s criminal investigation into the Fed chief.The DOJ earlier this month issued subpoenas to the Fed, prompting Powell to issue an unusually forceful response, accusing the administration of using the investigation as a form of intimidation.Without commenting directly on pressure from the Trump administration over rates, Powell repeated his defense of central bank independence.

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