On January 29, a Wednesday, Federal Reserve Chairman Jerome Powell made it clear during a press conference that the Federal Open Market Committee (FOMC) does not need to rush to alter its monetary policy stance, despite inflation remaining somewhat elevatedPowell emphasized the strength of the overall U.Seconomy, pointing out that while the labor market has cooled, it remains robust, with a broad range of indicators suggesting a balanced employment market and steady economic activity expansion.

Throughout the press briefing, Powell reiterated that the Fed is in no rush to adjust monetary policy, asserting that the current conditions are "very good for policy and the economy." He noted that long-term inflation expectations seem well-anchored, and the risks surrounding the dual mandate of inflation and employment appear roughly balanced"Given that our policy stance is already much more accommodative than it has been in the past, and the U.S

Advertisements

economy and job market remain strong, we do not see a need to rush into policy adjustments," Powell explained.

Moreover, Powell stated, "The Federal Reserve still expects inflation to improve further." Financial commentary outlets have suggested that Powell's remarks during the press conference seemed more dovish compared to the Fed's policy statementAdam Crisafulli, the chief editor of Vital Knowledge, interpreted the situation as follows: "Powell essentially indicated that the removal of language regarding inflation progress in the statement should not be interpreted as a hawkish shiftDuring the press conference, Powell acknowledged that inflation has significantly improved over the past two years, bringing it closer to the 2% target while inflation expectations remain anchored."

When discussing the potential resurgence of rate cuts, Powell made it clear that the Fed needs to see progress in annual inflation data

Advertisements

"The Federal Reserve will not take action until we see more evidencePrior to any policy adjustments, inflation needs to make real progress, or there needs to be some softening in the job market before we will consider making adjustments," he stated.

However, when asked specifically if the Fed needs to wait until inflation drops to 2% before resuming rate cuts, Powell clarified that this is not necessary"The Federal Reserve only needs to see further progress; there is no requirement to wait until it falls to 2% before cutting rates again." Additionally, Powell reiterated that the Fed's monetary policy is not on a predetermined pathIn terms of responding to risks and uncertainties, he indicated that the Fed is prepared to maintain a more restrictive policy or ease it depending on the circumstances"We know that reducing policy restraints too quickly or too much could potentially hinder the progress of inflation cooling down

Advertisements

Conversely, proceeding too slowly could excessively weaken economic activity and employment," he cautioned.

The Fed will carefully evaluate upcoming data, changing forecasts, and risk balances to adjust its policy stancePowell suggested that if the economy remains strong and inflation does not sustainably trend towards 2%, they may maintain policy restrictions for a more extended periodOn the other hand, if the labor market unexpectedly weakens or inflation drops faster than anticipated, they could accordingly ease policies.

So, will interest rate cuts resume in March? Powell didn't provide a definitive answerWhen specifically asked about the possibility of a rate cut in March, Powell observed that disinflation (the cooling of inflation) is on a “slow and at times bumpy road forward”, and the general consensus is that the Fed does not need to rush into further easing of policies.

Some analysts suggest that Powell’s repeated insistence on “no rush to adjust policy” may imply that unless future data shows marked weakness, the Fed will pause any rate cuts through January and March

• China's $768.6 Billion Stake: Will the U.S. Pay Up?
• Canada Lowers Interest Rate by 25 Basis Points
• Optimizing Market Access for New Industries and Sectors
• Funding Boost for Sci-Tech Innovation
• Price Fluctuations Rise in Consumer Sector

However, due to the notable uncertainty surrounding the economic impact of U.Spolicies, Krishna Guha, who heads global policy and central bank strategy at investment bank Evercore ISI, thinks the chances of a rate cut in March are diminishing: "While we will not rule out the possibility of a rate cut in March, Powell's emphasis on needing to observe the impact of U.Spolicies indicates that a broader group of Fed officials likely prefers June as the next decision point."

Marvin Loh, senior macro strategist at State Street Bank, further remarked that Powell seems to hold the view that U.Smonetary policy remains sufficiently restrictive, ensuring it neither excessively fuels inflation nor hinders economic goals: "Ultimately, whether this represents a long-term pause in rate cuts or an indication of the cessation of this round of rate reductions will significantly depend on future economic data

Nevertheless, the threshold for a complete pivot toward rate hikes remains quite high."

What else did Powell mention?

Regarding the markets, Powell addressed the recent selloff spurred by artificial intelligence developments, noting it is unsustainable and won't continue stubbornlyHe observed that many indicators currently suggest asset prices are elevated, predominantly due to the influence of technology and AIWhile overall financial conditions may appear loose, there are both positive and negative aspects to this trend.

Artificial intelligence has become a major topic on Wall StreetHowever, the Fed is primarily focused on macroeconomic developments, significant changes in financial conditions expected to persist over timePowell downplayed the macro implications that triggered the recent drops in European and American stock markets due to DeepSeek's developments but confirmed that the Fed is monitoring the topic closely.

Powell also reiterated the Fed will not be changing its inflation target of 2% anytime soon

Specifically, in the latest review of the monetary policy framework, the long-term target will remain unchanged and will not become a focal point of evaluationHis reasoning was that if the current 2% target cannot be achieved, then altering it would be meaningless.

However, some analysis indicates that Powell’s justification for not changing the 2% target hints at a willingness to reconsider this matter in the long run, as it suggests “now it cannot be reached.” Powell mentioned that the Fed has begun discussions regarding the assessment of the policy framework aimed to complete this evaluation process by the summer of 2025.

On the topic of neutral interest rates, Powell reiterated, “You cannot know exactly” where the neutral interest rate lies, but he believes the current Federal Reserve's policy rate is significantly high compared to the neutral rate