Jerome Powell Says Fed Is ‘Well-Positioned’ To Wait And See How The Economy Evolves After Close-Call Rate Cut

Powell said tariffs are driving the recent inflation overshoot, stressing the Fed’s job is to ensure the price spike remains a one-time effect.

• Powell described the latest policy move as a difficult decision, which was marked by high dissent among Fed officials.
• He said tariffs are contributing to elevated inflation but expects the impact to be a one-time price level adjustment.
• Powell added that he wants to leave the Fed with inflation easing and the labor market strong.

Federal Reserve Chair Jerome Powell said the central bank is now in a position to pause and observe how economic data develops following its third rate cut of the year. 

With 75 basis points of easing since September and 175 basis points since last September, Powell said the policy rate is “within a broad range of estimates of its neutral value,” allowing the Fed to be “well positioned to wait and see how the economy evolves.”

He added that the central bank will evaluate incoming data and the balance of risks before deciding on further adjustments.

A Difficult Decision With Rare Levels of Dissent

Powell described Wednesday’s move as finely balanced. “I could make a case for either side. It’s a close call,” he said, calling the environment “a very challenging situation.”

The meeting produced three dissents, with Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid opposing the cut, while Governor Stephen Miran pushed for a larger half-point reduction. It marked the Fed’s most divided vote since 2019, according to a CNBC report.

Despite divisions, Powell said no one is expecting rate hikes. “I don’t think that a rate hike is anybody’s base case at this point,” he noted.

Powell said policymakers broadly agree that risks have risen on both inflation and unemployment. “A very large number of participants agree that risks are to the upside for unemployment and to the upside for inflation,” he said.

Inflation Pressures Tied to Tariffs

Powell said inflation remains “somewhat elevated” due largely to tariffs implemented under U.S. President Donald Trump. “It’s really tariffs that’s causing most of the inflation overshoot,” he said.

He added that these levies are likely to generate a “one-time” increase in prices, and the Fed’s responsibility is to ensure that temporary inflation does not become persistent. “Our obligation is to make sure that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said.

Powell Wants To Leave Fed With Economy In ‘Good Shape’

As Trump begins interviewing candidates to succeed Powell as Fed chair, Powell highlighted his commitment to leaving the institution and the economy stable.

“I really want to turn this job over to whoever replaces me with the economy in really good shape,” he said. “I want inflation to be under control, coming back down to 2%, and I want the labor market to be strong.”

How Did Stocktwits Users React?

On Stocktwits, sentiment was 'bullish' with 'normal' activity for the SPDR S&P 500 ETF Trust (SPY), 'bearish' with 'low' activity for the Invesco QQQ Trust (QQQ), and 'neutral' with 'normal' activity for the SPDR Dow Jones Industrial Average ETF Trust (DIA).

Meanwhile, U.S. equities rose in Wednesday’s afternoon trade. At the time of writing, SPY was up 0.7%, QQQ was up 0.5%, and DIA was up 1.2%.

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