Federal Reserve Chair Jerome Powell said the US central bank will remain patient on interest rates as it monitors inflation and trade developments, with recent tariff moves and shifting export patterns adding complexity to the economic outlook.
“Near-term inflation expectations have moved up, tariffs [are] a driving factor,” Powell said at a news conference following the Fed’s decision to keep its benchmark rate unchanged. Still, he noted that most measures of longer-term inflation expectations remain consistent with the Fed’s 2% goal.
Powell acknowledged that sentiment in the economy has “soured,” reflecting concerns over trade policy, and said recent swings in net exports are “unusual” and complicate the interpretation of GDP growth.
“As long as we’re seeing the kind of labor market we have… we feel like the right thing to do is be where we are and learn more,” Powell said, adding: “No one holds these rate paths with a great deal of conviction.”
The Fed chair said policymakers expect to see a “meaningful amount of inflation in coming months,” but emphasized that waiting “a couple of months” could lead to “a smarter decision.”
Chris Zaccarelli, chief investment officer at Northlight Asset Management in Charlotte, said the Fed’s tone showed it is in no hurry to cut rates despite projecting two cuts this year.
“The Fed surprised the market with their comment that uncertainty is ‘diminished’, but didn’t surprise anyone by not cutting interest rates today,” Zaccarelli said. “Effectively they are sitting on their hands, waiting to see if tariffs increase inflation or the jobs market starts to falter.”