Federal Reserve Chair Jerome Powell will speak at the 2025 US Monetary Policy Forum at the Chicago Booth Booth Business School in New York. Here are some highlights of Powell’s critical speech:
- The Fed is not in a hurry to adjust interest rates. The labor market is solid and generally balanced. Inflation is slightly above the 2% target, but is gradually approaching.
- Uncertainty about the Trump administration’s policies and its economic impact remains high. Several recent inflation expectations surveys and market indicators show tariff increases.
- Most long-term inflation expectations are stable, consistent with the 2% target.
- The Fed is ready to wait for a clearer picture.
- The net effects of trade, immigration, fiscal and regulatory policies are the factors that have the most impact on economic and monetary policy.
- The Fed’s policy is not set to stone. If inflation progress stagnates, policies may remain restrictive. Alternatively, policies could be easing if the labour market unexpectedly weakens or inflation unexpectedly declines.
- Despite high uncertainty, the US economy is in good condition.
- The path to achieving the 2% inflation target is bumpy. The Fed does not overreact to one or two economic data reports higher or lower than expected.
- Recent metrics show slower consumer spending and increased uncertainty. It is still unclear how these developments will affect future spending and investments.
- Federal Reserve Chair Powell reiterated that the 2% inflation target is not the focus of the Fed’s framework review. The results of the review will be released at the end of the summer.
- Short-term interest rate futures in the US maintained forecasts that they would expect a total of three interest rate cuts in 2025 after the Fed cut interest rates in June and Powell said the Fed would not need to act in a hurry.
*This is not investment advice.
