Powell says Fed is awaiting ‘greater clarity’ on Trump policies before making next move on rates

Federal Reserve Chair Jerome Powell has indicated that the central bank is adopting a cautious stance on adjusting interest rates, opting to await greater clarity on the economic implications of President Donald Trump's policy initiatives. This approach underscores the Fed's commitment to data-driven decision-making amid a landscape marked by policy shifts and economic uncertainty.

Speaking at the U.S. Monetary Policy Forum in New York City, Powell emphasized the importance of distinguishing significant economic indicators from extraneous information. He highlighted that the Federal Reserve is not in a hurry to change monetary policy and plans to wait for more clarity on the potential impacts of these policies, especially concerning tariffs.

The Fed's cautious approach is influenced by the potential economic ramifications of recent policy changes, particularly in trade. The administration's imposition of tariffs on key trading partners, including Mexico, Canada, and China, presents a complex scenario for the central bank. These measures could potentially slow economic growth, suggesting a need for lower interest rates, but they might also increase costs and consumer prices, indicating a need to maintain or raise rates. This dilemma is intensified by the Fed's dual mandate to stabilize prices and promote maximum employment.

Despite these uncertainties, Powell reassured that the economy remains in a good place with stable inflation, mitigating some investor anxieties. He noted that while tariffs might lead to a one-time price increase, persistent inflation could become a concern if there are continuous tariff hikes. The Federal Reserve is expected to adopt a wait-and-see approach, carefully analyzing incoming data to inform future monetary decisions.

This measured stance reflects the Fed's commitment to its dual mandate of promoting maximum employment and stabilizing prices. By awaiting greater clarity on the administration's policies, the Federal Reserve aims to ensure that any adjustments to interest rates are well-informed and conducive to sustained economic stability.