The U.S. Federal Reserve (Fed) continues to maintain the benchmark interest rate in the range of 4.25%–4.50% — this is the third consecutive time the Fed has not changed its policy.
Although this was anticipated by the market, investors are particularly attentive to Chairman Powell's remarks amid increasing economic and geopolitical risks.
"We don’t need to rush," Powell said, indicating that the Fed wants to wait for clearer data before making any subsequent moves.
Tariffs under Trump back in the spotlight: A noteworthy point in the press conference was Powell's direct mention of the impact of the newly reinstated tax measures by the Trump administration. He warned that if these tax levels continue to be maintained, they could:
Putting pressure on inflation,
Slowing economic recovery,
And potentially causing the unemployment rate to rise.
This is a rare occasion where the Fed Chairman clearly acknowledges that political factors — especially trade policy — can significantly impact the outlook for controlling inflation.
The 'wait and see' approach:
Powell stated that the Fed is maintaining a cautious stance and will make decisions based on data. Although the economy is theoretically still operating steadily, the Fed wants to further assess the actual impact from trade barriers and monitor whether inflation continues to cool.
In other words: don’t expect the Fed to cut interest rates anytime soon.
In fact, Powell believes that these external factors could prolong the process of bringing inflation back to target for up to a year, meaning that high interest rates will remain for some time longer.
Not pivoting, nor tightening: So is the Fed leaning towards a hawkish or dovish stance?
Despite holding interest rates steady, Powell's tone is assessed to be slightly leaning towards the 'hawkish' side:
He acknowledges the immediate difficulties but does not provide any signals indicating that policy will be loosened in the near future.
The Fed is not yet ready to lower interest rates, especially when inflation still poses a risk of remaining high due to tax policy and other external factors.
However, the decision to not continue raising interest rates also indicates that the Fed believes the current interest rate is sufficient to control economic pressures.
The Fed maintains its independent stance:
In response to questions about political pressure, Powell affirmed: all Fed decisions are based on data, unaffected by political factors.
Although not directly mentioning President Trump, the message is quite clear: the Fed is preparing to face policy fluctuations and will maintain a neutral, objective stance in its responses.
