Federal Reserve Maintains Cautious Tone
Federal Reserve Chairman Jerome Powell addressed the U.S. Monetary Policy Forum in New York City, reaffirming the central bank’s cautious tone in the face of lingering economic uncertainties.
Powell reaffirmed the Fed’s openness to leaving interest rates unchanged, stating, “We do not have to be in a hurry, and are well placed to wait for more clarity.” He added that the Fed will continue to monitor economic data before it makes any adjustment to policy.
Labor Market Resilience
Powell pointed to the strength of the U.S. labor market, with employers adding 151,000 jobs in February and an average of 191,000 a month since September. The unemployment rate edged up to 4.1% but remained in a range of 3.9% to 4.2% over the past year.
He also noted that wages growth has slowed, balancing demand and supply for labor and mitigating inflationary pressures. “With wages growth slowing, the labor market is not a big source of inflationary pressure,” said Powell.
Inflation Trends and Monetary Policy
Powell acknowledged the decline in inflation from above 7% in mid-2022 to 2.5% in January. But he also warned that recent data remains somewhat above the Fed’s 2% target.
“The path to sustainably getting inflation back to our objective has been uneven, and we expect that will be the case,” he said, reiterating the Fed’s strategy of not overreacting to short-term volatility.
Trade Policies and Economic Outlook
The Federal Reserve Chairman also addressed recent trade policies, namely import tariffs affecting trade relations with Mexico, Canada, and China. He noted that the changes have contributed to market volatility and complicated economic projections.
Powell reiterated that the Fed would keep its primary interest rate steady in the coming months. The central bank had already lowered the benchmark rate by 100 basis points in late 2024, keeping it in the 4.25% to 4.5% range.
Crypto Market Reaction
The crypto market reacted with cautious optimism to Powell’s remarks. Investors appeared to be comforted by the Fed’s patience, even as they feared potential stagflation and the repercussions of former President Trump’s crypto summit.
Powell’s remarks underscore the Fed’s commitment to stability, balancing inflation control with economic growth, as financial markets grapple for certainty.
