Author: admin

• Inflation is the big story. The FOMC is closely monitoring the impact of tariffs and the US-Iran war on inflation rates. Powell said shocks to the global energy supply are meaningfully driving up consumer prices, but it’s unclear how long that will last.
• The job market is shaky. While overall economic growth is strong, the employment situation is tenuous. Low hire and quit rates, limited vacancies, and dwindling labor force participation could continue, especially if interest rates stay high.
• Powell might stay. If nominee Kevin Warsh isn’t confirmed by the scheduled May 15 transition date, Powell said he will remain in the role temporarily — at least until the DOJ investigation concludes. He is eligible to remain on the committee as a governor until early 2028.

The central bank will meet again on April 28 and 29 to determine the next interest rate move. It is scheduled to be Powell’s last meeting as chair. Kevin Warsh’s confirmation hearings are expected to be held this spring, though no date has been announced.

Productivity gains in the US economy began years before generative AI was made available to the public, Powell said, and he expects technology to contribute to this growth.

“Higher productivity is the thing that allows incomes to rise over time, so it’s a great thing,” he said. There is some tension, however, about whether the supply of data centers can keep up with increasing demand.

As Trump puts pressure on the Fed, Powell said “independence is what allows us to do our jobs and stable prices is one half of our mandate.” This is key to lightening the inflation load on American consumers, he said.

“Every advanced economy that looks anything like the US” has central bank independence, he added.

The committee has “growing confidence in productivity,” Powell said, which is reflected in its optimistic GDP projections. He added that America isn’t in stagflation territory, as unemployment and inflation rates remain historically low.

He said he’s hopeful that short-term events like steep gas prices or company layoffs won’t hurt the country’s long-term economic health. He said he “can’t make a prediction” about future policy decisions and maintains the Fed’s current “wait-and-see” strategy.

“The US economy has been strong through a whole bunch of challenges,” Powell said. “It’s been amazing to see.”

The Fed chair said FOMC members discussed the possibility of a hike at the April meeting, though they will have to learn more about the impact of tariffs and steep oil prices on overall inflation. The central bank will also have another month of employment data before making its next decision.

“I think everyone does agree that we will be watching those extremely carefully,” he said.

It is a strange moment in the job market with “very low, near nonexistent growth in our labor force,” Powell said. Quit and vacancy rates are low, and hiring has slowed alongside widespread white-collar layoffs. “Immigration is the biggest factor there,” he added.

An effort to curb inflation with somewhat restrictive rates could risk slowing an already sluggish job market. It’s “not a comfortable balance,” Powell said.

Powell said he would continue serving as chair on a pro tem basis if Warsh’s confirmation goes awry, and he will stay on the Board as long as the Department of Justice investigation is ongoing. The DOJ launched a probe into Powell in January alleging that he mishandled construction efforts at the Fed’s Washington, DC, office.

He said he may remain on the board after his term ends on May 15. He is allowed to stay on as a governor until May 2028, though this is historically rare among former Fed leaders.

“I have not made that decision yet and I will make that decsion based on what I think is best for the institution and for the people we serve,” he said.

US stocks tumbled as Jerome Powell’s press conference got going. The Dow added to losses earlier in the day, dropping by more than 500 points as traders mulled the outlook for inflation after the central bank held rates steady.

Markets were already on edge after a hot PPI reading, and as traders watched oil prices climb further above $100 a barrel. The selling picked up as Powell told reporters that the Fed wasn’t seeing the progress on inflation that it had hoped for.

“The risk here is disruptions within global oil supply last longer than expected. If economies must deal with elevated petroleum prices now through the summer, the economic impact will be larger than currently priced today,” Jeffrey Roach, chief economist for LPL Financial, said ofter the decision.

Powell said interest rates are mildly restrictive and he doesn’t want the FOMC to “overreact” to short-term news events. He said inflation on consumer goods has lately been driven by tariffs, which the Fed is trying to control — though Powell said he doesn’t want to further weaken the labor market with high rates.

“We’re in a difficult situation,” he said. “We feel like our framework calls on us to balance the risks.”

Powell said “nobody knows” how disruptive the Iran war will be in the long run. The Fed chair said the US economy is doing “pretty well,” despite energy shocks.

“If we have a long period of much higher gas prices, that’s going to weigh on consumption and weigh on disposable personal income,” he said. “But we don’t know if that’s going to happen.”

Inflation has been above the Fed’s 2% target for roughly five years, with some “shocks disrupting progress,” Powell said. He gave tariffs and supply chain disruptions in the Middle East as examples. He said the Fed does not take decisions around interest rates and inflation lightly.

“Progress should come” later this year, he said. “If we don’t see that progress, you won’t see a rate cut.”

Powell opened the press conference by emphasizing the Fed’s dual mandate goals — maintaining stable prices and maximum employment. He said while job gains have been low and inflation remains elevated, the unemployment rate itself has remained relatively unchanged.

Economic activity has been “expanding at a solid pace,” and consumer spending has been “resilient,” Powell said, but the housing sector has been weak. He said lower job gains are due to limited demand, lower immigration, and decreased participation. Inflation has eased from 2022 highs but remains about the Fed’s 2% goal. Supply disruptions due to the US-Iran war are driving these climbing prices for businesses and consumers.

“The implications of the events in the Middle East are uncertain,” Powell added. “In the near-term, higher prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.”

The committee included a sentence in today’s statement saying that “the implications of developments in the Middle East for the US economy are uncertain,” posing a credible risk to inflation.

There were other small changes from previous meetings in the wording of various phrases in the statement. At the January meeting, the Fed said unemployment levels “had shown some signs of stablization.” That line was amended to unemployment “has been little changed” in today’s release following the start of the war and a disappointing February jobs performance.

The Fed’s latest economic projections show that the median FOMC member sees just one cut this year. Most expect either zero cuts or one by the end of 2026. No members expect a hike coming this year.

The last projections were in December, which showed a looser range of what could happen. December’s projections also showed the median member penciled in one cut for 2026.

The Fed’s first-quarter economic projections show that the Fed has become more pessimistic about inflation rates since December, though the committee’s outlook on the employment situation remains unchanged. GDP projections indicate that the FOMC sees slightly higher future economic growth, even with economic challenges from the Iran war.

The was only one dissent on today’s vote — which is more uniform than the FOMC has been lately. The committee has disagreed on interest rates at every meeting since September. Ten commitee members, including Powell, voted in favor of the hold. Trump appointee Stephen Miran hoped for a quarter-point cut.

The Fed will keep its benchmark interest rate steady between 3.5 and 3.75%, in alignment with expectations. It’s the second rate hold in a row from the committee. Powell will hold a press conference at 2:30 p.m. ET to discuss.

Powell will begin the Fed’s March press conference at 2:30 p.m. with an overview of the economic situation, including updated inflation and employment outlooks.

Next, the central bank chair will take questions from journalists. We expect Powell will be asked about the Iran war, continued political pressure from the Trump administration, trade, the impact of AI on the job market, and more. Powell’s answers could give insight into his final months at the Fed.

FOMC decisions impact mortgages, credit card rates, auto loans, and savings accounts over time. The borrowing rates for these typically follow the same pattern as the Fed’s benchmark short-term rate.

It’s unlikely Americans will feel the impact of a single rate call, but a pattern of cuts or hikes can have an effect over time. Higher interest rates can help curb inflation, but they may push companies toward layoffs or hiring freezes over time.

The Fed releases new economic projections each quarter. Today, the committee will share its plans for monetary policy over the next months and years. In the December economic projections, Fed leaders penciled in one rate cut for 2026.

While these projections aren’t set in stone, they are a solid look into America’s long-term economic stability.

The Supreme Court struck down many of Trump’s tariffs in a major February decision the president called “ridiculous.” After the ruling, business leaders and consumers have struggled to sort out how — and if — the government should distribute refunds. Trump has since instituted another round of global tariffs on most imports.

Though recent inflation rates have remained a little above the Fed’s 2% goal, Powell said the levies have already hit the economy. If prices rise, it will likely be for other reasons.

Powell’s term as chair ends in May, but he’s eligible to remain on the Fed committee until early 2028. It’s rare for former chairs to stay on as governors, and Powell has not publicly shared his plans.

When asked about his legacy in December, Powell said, “I really want to turn this job over to whoever replaces me with the economy in really good shape.”

Before being confirmed as the next chair, Warsh would need to testify in hearings before Congress. Lawmakers would ask him questions about his experience level and outlook on monetary policy. These hearings haven’t been announced, but are expected to occur in the next month.

Warsh would need support from both Democratic and Republican leaders to receive confirmation — far from guaranteed due to pushback over the DOJ probe. If his candidacy isn’t approved, Trump would need to nominate another successor for Powell, and the process would start over.

Powell said he does not take politics into account when making rate decisions — and he hopes the Fed can maintain trust with the American people, despite political pressure.

“The point of independence is not to protect policymakers or anything like that,” he said in January. “It just is that every advanced-economy democracy in the world has come around to this common practice.”

The producer price index — a key measure of wholesale inflation — unexpectedly jumped by 3.4% year-over-year in February, per a Wednesday morning release from the Bureau of Labor Statistics. Compared to the buyer-oriented CPI, PPI looks at prices from a seller’s point of view, indicating the changing cost of energy and raw materials. An inflation jump like this complicates today’s Fed decision.

“This report likely reinforces a hold decision by the Federal Reserve later today but tilts the risk toward a more hawkish tone in today’s FOMC decision,” said Eugenio Alemán, the chief economist at Raymond James. “Even if rates are left unchanged and we see multiple dissents, the messaging may lean toward ‘higher for longer,’ especially with energy inflation set to re‑enter the picture in coming months.”

Major stock indexes dipped ahead of the coming Fed decision and press conference from Jerome Powell. The Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 were all down slightly less than 1%.

Meanwhile, oil prices are still rising as investors continue to monitor the Iran war. Markets will be keenly focused on any commentary in Powell’s remarks that indicates how the central bank is thinking about higher oil prices and the impact on inflation. Brent crude rose 6% to over $109 per barrel, while US crude prices rose 3% to $99.

Trump has long been vocal about wanting lower borrowing costs, and he hopes the next Fed chair will work more closely with the West Wing on rate decisions. This attitude has sparked alarm with economists, lawmakers, and bank leaders, as the Fed has historically been nonpartisan.

“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump said when announcing Warsh’s nomination. On March 12, the president also posted that Powell “should be dropping Interest Rates, IMMEDIATELY, not waiting for the next meeting!”

For the past year, the Fed has faced increasing pressure from the White House to lower interest rates. Powell has been in the hot seat, with Trump often threatening to fire him before the end of his term. Fed Governor Lisa Cook’s case — in which she denies the administration’s accusation that she committed mortgage fraud — was heard by the Supreme Court in January. The Department of Justice also launched a probe into Powell’s handling of construction at its Washington, DC, buildings. Powell said the “unprecedented action should be seen in the broader context of the administration’s threats.”

Federal judge James Boasberg dismissed subpoenas in the probe last week.

“A mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning,” Boasberg said. “On the other side of the scale, the Government has produced essentially zero evidence to suspect Chair Powell of a crime; indeed, its justifications are so thin and unsubstantiated that the Court can only conclude that they are pretextual.”

Powell has left the chair with a piece of advice for his successor: “Stay out of elected politics. Don’t get pulled into elected politics. Don’t do it.”

With Powell’s term up May 15, Trump nominated former Wall Streeter and Fed governor Kevin Warsh as successor. Warsh has a reputation for being hawkish on monetary policy and tough on inflation, and it’s unclear if he will uphold Trump’s desire for steep interest rate cuts.

Hearings for Warsh’s nomination aren’t yet scheduled, and his confirmation may be an uphill battle. Lawmakers across the aisle, especially retiring North Carolina Senator Thom Tillis, who sits on the Senate Committee on Banking, Housing, and Urban Affairs, have said they won’t approve of any chair nominees from Trump due to concerns over Fed independence. The president hopes the next Fed leader will consult with him more closely on decisions.

For the FOMC, Wednesday’s meeting will continue setting the tone for monetary policy in 2026. The Fed previously penciled in one rate cut for the year, but that’s subject to change based on economic conditions. This is Jerome Powell’s second-to-last meeting before his term as chair ends.

How the Fed responds to war-related inflation concerns and the disappointing February job numbers will have trickle-down effects on various consumer borrowing rates.

Oil prices recently surged past $100 per barrel in response to the US and Israel’s ongoing air strikes against Iran. Trump signaled that the war could end soon, briefly calming markets, but volatility remains. Most traffic through the Strait of Hormuz has been halted since the first week of March.

Average gas prices have climbed to over $3 a gallon, and many consumers are scrambling to fill up their vehicles. It’s the first time since 2023 that every US state posted an average gas price above $3, per AAA.

The war has already pushed up the cost of some plane tickets, and oil supply disruption could soon start impacting the cost of household utilities and food.

The Bureau of Labor Statistics published new consumer price index data last Wednesday, showing the inflation rate held steady at 2.4% in February as expected. Core inflation, which excludes volatile food and energy prices, also held steady at 2.5%.

However, that report was based on data mainly gathered before the start of the Iran war, which could heat up inflation and jeopardize progress toward the 2% goal. Economists expect to see the effects of the oil shock from the Iran war as soon as the next report.

Oil prices remain elevated as the Strait of Hormuz remains largely closed off. Gas prices are up from a month ago, and there are other factors affecting what consumers pay at the pump, such as higher demand in the spring.

Alexandra Wilson-Elizondo, global co-chief investment officer of multi-asset solutions at Goldman Sachs Asset Management, said February data “was collected before the conflict in Iran sent crude oil surging roughly 30%, with natural gas, aluminum, fertilizer, freight rates, and shipping insurance moving higher with it.”

“The Strait of Hormuz remains the wildcard, and if disruption is sustained, the inflation improvement embedded in today’s print could reverse quickly,” Wilson-Elizondo said in commentary following the CPI report.

Even though the US needs fewer jobs to keep unemployment steady than in the past, February’s job market report was disconcerting. The US lost 92,000 jobs in February after adding a revised 126,000 jobs in January. That was partly due to job losses in the healthcare sector from a strike. Unemployment ticked up, and labor force participation dropped to its lowest level since December 2021, at 62%.

“It’s going to be a much more competitive market, and so if you are looking for a job right now, you need to be doing the things that are going to help you stand out,” Cory Stahle, an economist at Indeed Hiring Lab, said.

The broader economy is also looking worse than previously thought. GDP revisions published on Friday showed that real growth in last year’s fourth quarter was just 0.7%, half the 1.4% estimate in the advance report in February.

With a hold from the Fed heavily priced in, the conflict in Iran continues to be the biggest show in town in markets.

Relative calm is the prevailing narrative on Wednesday, with futures in all three major US indexes pointing towards gains of around 0.5% when trading begins at 9:30 a.m. ET.

In Europe and Asia, stocks are also trading higher, with Germany’s DAX benchmark 0.7% up as of around 7 a.m. ET, and Japan’s Nikkei 0.6% higher.

Oil’s two main benchmarks diverged a little on Wednesday morning, with WTI oil down 1% to around $94 per barrel, and Brent crude, the international benchmark, up 0.5% to just shy of $104.

The dollar index, which tracks the greenback against a basket of global currencies, was almost completely unmoved, trading 0.03% higher.

CME FedWatch, which estimates probabilities of the Fed’s choices based on market moves, is predicting a near-total chance of an interest rate hold. Holding rates steady could help temper inflation, at the risk of leaving an already sluggish labor market without support. Fed leaders will have to weigh both ends of their dual mandate, which focuses on stable prices and maximum employment.

Powell was optimistic at the January meeting: “The US economy expanded at a solid pace last year and is coming into 2026 on a firm footing,” he said. “While job gains have remained low, the unemployment rate has shown some signs of stabilization, and inflation remains somewhat elevated.” However, with rapidly shifting oil prices, the committee’s inflation outlook may now be more tempered.

Central bank leaders last met in late January. Since then, the Bureau of Labor Statistics reported a loss of nearly 100,000 jobs, the Supreme Court voted down many of President Donald Trump’s tariffs, and the US began a war with Iran that cut off a large part of the world’s energy supply.

If the FOMC wasn’t already feeling cautious about monetary policy, they are now.