MNI FED WATCH: Powell In No Hurry Amid Heightened Uncertainty

The Federal Reserve's monetary policy is well-placed to allow policymakers to sit tight for now as increased uncertainty from President Donald Trump's tariffs policies have yet to feed through perceptibly to a still-robust economy, Fed Chair Jerome Powell said Wednesday.

"We don't think we need to be in a hurry. We think we can be patient. We are going to be watching the data. The data may move quickly or slowly. But we do think we are in a good position where we are to let things evolve and become clearer in terms of what should be the monetary policy response," Powell told reporters. 

"It's not a situation where we can be preemptive because we actually don't know what the right response to the data will be until we see more data," he added. 

FOMC members said on Wednesday in their post-meeting statement they are watching the risks to both sides of its dual mandate and judge that the risks of higher unemployment and higher inflation have risen.

MATERIALIZE

Futures traders are pricing in just over three 25 basis point interest rate cuts through the end of the year, down from four cuts a few days ago. Powell expressed comfort with the policy stance, which he characterized as “modestly,” “moderately,” or “somewhat” restrictive. (See: MNI INTERVIEW: Fed On Hold Until Tariff Pause Passes- Lockhart)

Asked whether the Fed's March forecasts showing the median FOMC participant sees two rate cuts this year remains a good guidepost, Powell declined to say. "We have the June meeting, and you will have another SEP. I'm not going to hazard a guess here today as to what it would be," he said. 

The Fed Chair said Trump's admonitions and demands for rate cuts are not impacting monetary policy. "Doesn't affect doing our job at all," he said. "It really doesn't affect either our job or the way we do it." 

Powell acknowledged souring U.S. sentiment, with "extremely elevated" uncertainty about the path of the economy. "The downside risks have increased. The risk is, as we pointed out in our statement, the risks of higher unemployment and higher inflation have risen.  But they haven't materialized yet." 

"Despite heightened uncertainty, the economy is still in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has come down a great deal but has been running somewhat above our 2% longer-run objective," Powell said. 

"In the labor market, conditions have remained solid," he added. "Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment." 

CLASHING GOALS

The Fed noted concerns about the possibility that its goals of maintaining a healthy labor market and low inflation could come to clash with one another. 

"We could be in a position of having to balance those two things, which is, of course, a very difficult balancing judgment that we would have to make," Powell said. "If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close."

"For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance."