The Federal Reserve decided to keep the target range for interest rates between 4.25% and 4.50% for the fourth consecutive meeting, with an expected guidance for two rate cuts (by -50 basis points) during the year according to official communication mechanisms.
**Hawkish Tilt**
Despite maintaining stability, Powell showed a more hawkish stance than previous meetings, raising inflation expectations (to 3.0%) and lowering growth expectations (to 1.4%) for 2025. Some described this as an early signal of the risk of "stagflation."
Unclear future path
Powell stressed that the interest rate plan ("dot-plot") should not be seen as a rigid commitment—all decisions will be linked to new data and inflationary pressures resulting from trade tariffs and geopolitical conditions.
The crux: Trade tariffs
Powell emphasized that raising tariffs will lead to inflation that consumers will bear. He used a poignant phrase: "Someone has to pay for the tariffs." He noted that the effects of these tariffs, whether temporary or long-lasting, will determine the future path.
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🎯 Key detailed points
Growth and employment The labor market remains strong (unemployment ~4.2%), and GDP growth is slowing at around 1.4–1.6%.
Inflation Core inflation (~2.6% PCE) exceeds the 2% target, while overall inflation is ~2.3% annually. Inflation expectations rose to 3% for 2025.
Market sentiment Investors continue to expect cuts starting in September, but Powell warned against over-reliance on these expectations.
Political independence Powell confirmed the Fed's independence, despite increasing pressures from President Trump, who called for sharp cuts and labeled him as "stupid."
🔍 Comprehensive analysis
1. Caution strategy (Data‑Dependent)
Powell reinforces the cautious approach, citing hesitation in the current economic condition, especially with the impact of tariffs. He described it as a "wait-and-see approach" unless clear data emerges.
2. Indicators of imported inflation
Trade tariffs often temporarily cause price increases, but investors remain cautious about the prospects of sustained inflation and a return to higher levels.
3. Political pressures
Trump's harsh statements warn of a potential challenge to the bank's independence, but his reaction confirms that the Federal Reserve maintains its independence and operates based on economic data rather than direct political pressures.
4. Communication language is balanced
The expectation of "two potential cuts" this year is presented as "it may happen if economic conditions improve or inflation slows," rather than as a confirmed plan.
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✅ Summary
Powell's recent statements reflect his balance between caution and flexibility: he keeps the door open for rate cuts if economic pressures worsen, but he has not rushed into a hasty decision due to inflationary risks associated with tariffs and geopolitical tensions.
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