By Christopher Lugerber
NEW YORK (AP) — The Federal Reserve is likely not changing key interest rates in the coming months as it awaits widespread “uncertainty” stemming from President Donald Trump’s resolution policy, Chairman Jerome Powell said in a written statement delivered Friday in New York.
Powell said the Trump administration has made policy changes in several areas, including trade, taxes, government spending, immigration and regulations, adding that the “net effect” of these changes is important for the economy and the Fed’s interest rate policy.
“Although it has recently evolved into some of these areas, particularly trade policy, uncertainty about change, and the likelihood of its impact remains high,” Powell said. “As Outlook evolves as we analyze incoming information, we focus on isolating the signal from the noise. We don’t have to hurry, we’re in a good position to wait for it to become clearer.”
Most economists say Trump’s plan to slap tariffs on a wide range of imports, including a partially delayed Thursday, a 25% obligation from Canada and Mexico, will boost prices and speed up growth. But many hope that tax cuts and deregulation could boost the economy.
Powell said the economy remains largely healthy despite “a rise in uncertainty.” He characterized Friday’s employment report, showing that employers added 151,000 jobs, bringing the unemployment rate to as high as 4.1% in line with “solid” profits over the past six months.
He also said there were signs of slower consumer spending compared to healthy profits in the second half of last year, and that the consumer and business survey “points to growing uncertainty about the economic outlook.”
The Fed’s own beige book is a collection of anecdotes from hundreds of companies, with 47 mentions uncertainty in the latest release released Wednesday, starting from just 17 in January. The Fed publishes beige books eight times a year.
Powell spoke at a conference hosted by the University of Chicago Booth Business School.
President Donald Trump’s repeated, repeated tariff policies and rapid fire layoffs of government workers have caused a surge in uncertainty among businesses and a sharp decline in consumer confidence. Many economists reached an annualized estimate of economic growth of 1% over the first three months of this year, down from 2.3% in the last quarter last year.
As a result, Wall Street traders have boosted their forecasts for interest rate cuts. Futures pricing shows that for about a month, the Fed has been expecting three rate cuts this year. These rate reductions will help reduce borrowing costs for mortgages, car loans, credit cards, and business loans.
But as Gov. Christopher Waller pointed out Thursday, there are cuts in “good news” and cuts in “bad news.” The “bad news” cuts occur when the Fed lowers the rate out of concern that the economy is slowing, but the “good news” cuts reflect the sense that the Fed has returned to its 2% target.
Waller added that he believes the Fed can engineer a “good news” rate cut later this year, but he dismissed the possibility of a cut at the Fed’s next meeting this month.
After cutting the key rate last year to around 4.3% three times last year, Powell showed in January that the Fed would suspend further cuts amid signs that inflation remains above target. The central bank’s preferred inflation gauge shows prices rose 2.5% in January compared to a year ago. Excluding the volatile food and energy categories, core prices rose 2.6%, the lowest increase since June.
Original release: March 7, 2025, 12:35pm EST
