Powell: No Rate Change for Now

WASHINGTON — Federal Reserve Chair Jerome Powell indicated Tuesday that the central bank is prepared to maintain current interest rates while monitoring economic developments, according to his prepared remarks for the Semiannual Monetary Policy Report to Congress.

Powell described the U.S. economy as being in a "solid position" despite elevated uncertainty, with the unemployment rate remaining low at 4.2% in May. He noted that labor market conditions are "broadly in balance and consistent with maximum employment."

The Fed chair acknowledged that inflation has "eased significantly" from its mid-2022 peaks but remains above the central bank’s 2% target. Total personal consumption expenditures prices rose 2.3% for the 12 months ending in May, while core PCE prices, excluding food and energy, increased 2.6%.

Powell pointed out that near-term inflation expectations have risen in recent months, with surveys indicating tariffs as the primary factor. However, longer-term expectations remain aligned with the Fed’s 2% goal.

The Federal Open Market Committee has maintained the federal funds rate target range at 4.25% to 4.5% since the beginning of the year. Powell emphasized that the Fed is "well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."

Regarding potential tariffs, Powell warned they could "push up prices and weigh on economic activity," though the effects might be a one-time shift in price levels rather than persistent inflation. He stressed the Fed’s commitment to preventing "a one-time increase in the price level from becoming an ongoing inflation problem."

Powell noted that GDP edged down in the first quarter, reflecting swings in net exports driven by businesses importing goods ahead of potential tariffs, while private domestic final purchases grew at a solid 2.5% rate.

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