Fed Chair Jerome Powell Explains Decision to Hold Rates Steady Amid Economic Uncertainty

Economic Outlook and Policy Stance

• 🎯 The Federal Reserve remains focused on its dual mandate of achieving maximum employment and stable prices for the American people.
• 📊 Despite elevated uncertainty, the economy is considered solid, with a low unemployment rate and moderating wage growth that still outpaces inflation.
• 📈 GDP growth was reported to have edged down in the first quarter, but private domestic final purchases grew at a solid 2.5% rate, indicating underlying strength.

Inflation and Expectations

• ⚠️ Inflation has eased significantly but remains somewhat elevated above the 2% longer-run objective, with PCE prices rising 2.3% and core PCE prices rising 2.6% over the 12 months ending in May.
• 🗣️ Near-term inflation expectations have moved up, largely attributed to trade policy concerns and tariffs, but longer-term expectations remain consistent with the 2% goal.
• ⚖️ The Fed's policy actions are guided by the dual mandate, and they are well-positioned to wait and gather more data before considering policy adjustments.

Monetary Policy Decisions

• ⏸️ The Federal Open Market Committee decided to leave the policy interest rate unchanged, maintaining the target range for the federal funds rate at 4.25% to 4.5%.
• 📉 The committee will continue reducing the size of its balance sheet and will base future policy decisions on incoming data, the evolving outlook, and the balance of risks.
• 🌐 Changes in trade, immigration, fiscal, and regulatory policies introduce uncertainty, and their effects on the economy are still unfolding.

Framework Review and Future Outlook

• 🔍 The Fed is conducting a five-year review of its monetary policy framework, focusing on assessing risks, uncertainties, and potential implications for policy strategy and communications.
• 🗓️ Modifications to the statement on long-run goals and monetary policy strategy are intended to be finalized by late summer.
• 🤝 The Fed is committed to supporting maximum employment, bringing inflation sustainably to its 2% goal, and keeping longer-term inflation expectations well anchored, understanding that its actions affect communities, families, and businesses nationwide.