Powell on monetary policy: The Fed will be patient and watch Trump's policies, not in a hurry to cut interest rates

Fed Chairman emphasized policy flexibility, waiting for Trump's policy impact to clarify

Jerome Powell, chairman of the Federal Reserve (Fed), said on Friday that the central bank does not need to adjust its interest rate policy urgently at the moment. Instead, it can wait and see, waiting for the clear impact of President Trump's policy changes on the economy before taking action.

Amid market turbulence due to Trump's tariff plan and other policies, Powell reiterated that the Fed will remain patient and closely monitor the development of the economic outlook. He pointed out that the White House is pushing for major policy changes in four areas, including trade, immigration, fiscal policy, and regulatory measures, and the overall impact of these policies will determine the Fed's future monetary policy path.

Federal Reserve: No rush to change policy, will wait patiently for economic trends

During his speech at the U.S. Monetary Policy Forum, Powell stated that the uncertainty brought about by current policy changes remains high, so the Fed's primary task is to "distinguish signals from noise" to ensure that decisions are based on clear economic trends. He emphasized: "We do not need to act in haste, but can patiently wait for greater certainty."

There is a certain discrepancy between this statement and the market's general expectation of a rate cut. According to CME Group's FedWatch tool, traders predict that the Federal Reserve will cut interest rates three times this year, each time by 0.25 percentage points, possibly starting as early as June. However, Powell's remarks indicate that the Fed is still maintaining a wait-and-see attitude and is not eager to push for loose monetary policy.

The market is full of expectations for interest rate cuts, and Powell emphasizes that "policy is not a preset path".

The Trump administration's tariff policy has made the market sentiment more sensitive, leading investors to generally expect the Fed to cut interest rates to address economic risks. However, Powell emphasized that the Fed's policy does not have a 'preset path,' but will be adjusted based on changes in economic data. He said: 'Our current policy stance has fully taken into account the risks and uncertainties we face to ensure we fulfill our dual mandate.'

The forum is hosted by the Clark Global Markets Center, a subsidiary of the Booth School of Business at the University of Chicago, with several Federal Reserve officials in attendance. Recently, most Federal Reserve policymakers believe that the U.S. economy remains robust and expect inflation to fall back to the target level of 2%. However, the impact of Trump's policies has not yet fully manifested, making the future direction of monetary policy full of variables.

US Economic Situation: 'Labor market is robust, inflation still remains uncertain'

Powell is optimistic about the overall economic outlook in the United States. He pointed out that the current US economy is in a 'good state', with a stable job market and inflation gradually returning to the Fed's 2% target. However, he also acknowledged that recent market surveys have shown that investors still have concerns about the inflation outlook, mainly due to Trump's tariff policy potentially pushing up prices.

According to the inflation gauge of the Federal Reserve, the 12-month core inflation rate is 2.6%, excluding food and energy prices, it is 2.5%. Powell said: "The process of inflation returning to the target level will not be smooth sailing, and we expect this volatility to continue."

Federal Reserve Board Governor Adriana Kugler also stated on Friday in Portugal that she believes 'there are still upward risks of inflation', so the current policy interest rate may need to be maintained at the current level for a period of time to ensure price stability.

Latest employment report: non-farm employment increased by 151,000, with stable wage growth

On the same day that Powell gave a speech, the U.S. Department of Labor released the employment report for February. The data showed that the non-farm employment increased by 151,000 people in that month, slightly below market expectations. However, Powell still believes this is a positive signal, stating: 'This report once again proves that the U.S. labor market remains robust and generally balanced.'

In terms of wages, the average hourly wage in February increased by 0.3%, with an annual growth rate of 4%. In addition, the unemployment rate rose slightly to 4.1%, mainly affected by the decrease in the number of family employment. Powell believes that although the job market is still changing, the wage growth rate is more sustainable than the rapid increase after the epidemic.

The Federal Reserve will remain on the sidelines in the short term, with the market focusing on the future policy direction.

Based on Powell's remarks and the latest economic data, the Fed's current position remains cautious and does not clearly indicate a timetable for rate cuts. With the gradual impact of Trump's policies becoming evident, the market will closely monitor the Fed's next steps. In the coming months, changes in inflation, labor market performance, and global economic conditions will all be important factors influencing decisions.

Investors will continue to pay attention to the remarks of Federal Reserve officials to find clues to potential policy shifts. For the market, 'patient waiting' may become a key phrase for the future period.

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