On March 8, 2025, Federal Reserve Chairman Powell stated on Friday (March 7) that the Fed can wait for a clearer economic outlook under the new government before discussing rate cuts.
Powell reiterated the Fed’s previous statement during the U.S. Monetary Policy Forum, recommending patience with monetary policy in highly uncertain conditions.
He pointed out that the White House is making significant policy adjustments in four different areas – trade, immigration, fiscal policy, and regulation – and that the net effects of these policy changes will be crucial for the economy and monetary policy direction.
According to the FedWatch indicator from the Chicago Mercantile Exchange, traders have pushed expectations for three rate cuts of 25 basis points each starting from June to the end of the year.
In the last four months of 2024, the Fed lowered the benchmark interest rate by 100 basis points to a range of 4.25% to 4.5%. At the January 2025 meeting, the Fed maintained its policy. Several Fed officials indicated plans to hold steady at the upcoming meeting on March 18-19.
Powell’s latest comments also suggest that the Fed will remain in a wait-and-see mode before considering further easing policies.
“Our policy is not on a preset course,” he said. “Our current policy stance is well-suited to address the risks and uncertainties we face in fulfilling our dual mandate.”
The Fed’s dual mandate is to ensure full employment while maintaining inflation at the 2% target level.
Many Fed officials attended the forum on Friday. Most officials expressed expectations for a stable economy, a return of inflation to the Fed’s 2% target, and an unclear interest rate environment as Trump’s policies become clearer.
Powell also held an optimistic view of the macro environment, describing the U.S. as being in a “good state,” with a “healthy” labor market and inflation steadily returning to the target level.
However, he acknowledged doubts about inflation trends, primarily due to concerns about the Trump administration’s new tariffs.
“The path to sustainably returning to the target inflation rate has been rocky, and we expect this to continue,” Powell said.
“Inflation data may fluctuate between months, and we will not overreact to one or two data points above or below expectations,” he added.
The employment report released on Friday showed an increase of 151,000 in non-farm payrolls in February. Powell stated that the labor market remains “robust and overall balanced.”
“Wage growth is outpacing inflation, and it is more sustainable than the early stages of the pandemic recovery,” he said.
According to the employment report, average hourly earnings rose by 0.3% in February, up 4% year-on-year. Additionally, with a decline in the household employment rate, the unemployment rate rose slightly to 4.1%.