Powell Congress Testimony: Powell Urges Patience on Rates, Says Inflation Needs to Slow Down Before Cuts

On average, central bankers scaled back their expectations for rate cuts in the new year. The median fed fund rate projection for 2025 was 3.9, compared to the 3.4 expected when the last summary came out in September. President Donald Trump’s on-again, off-again tariff policy and rapid-fire layoffs of government workers has created a spike in uncertainty among businesses and caused a sharp drop in consumer confidence. Many economists have marked down their estimates for the economy’s growth to as low as 1% at an annual rate in the first three months of this year, down from 2.3% in last year’s final quarter. The projections are a snapshot of individual committee members’ best guesses on the future of unemployment, inflation and rate cuts. Economists expect that the average prediction will be three rate cuts in 2025, fewer than were expected when they last published their expectations in September.

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Here are key takeaways from the Fed’s latest decision as Trump proceeds with significant policy changes. Fed policymakers also expect the economy to be weaker this year than previously thought, according to the projections. When asked by Sen. Jack Reed of Rhode Island if Powell stands by testimony he made in 2018 saying that countries promoting open trade with no barriers led to faster growth and higher incomes, the Fed chief stood by that comment.

Federal Reserve as it happened: US central bank cuts growth as Trump’s policies weigh on outlook

“Interestingly … he is probably the candidate who has written the least and has the least history of talking about monetary policy.” Mr Powell has spoken in favour of gradual rate hikes and a modest unwinding of its balance sheet. If confirmed by the Senate, he would be the first chair in decades without an economics degree. A Republican, Mr Powell – known as Jay – has served on the Federal Reserve board since 2012, voting with the majority on issues such as interest rates.

Chair of the Federal Reserve

The FOMC uses interest rates as a tool to stimulate or stifle the economy. When the economy is running too hot and fueling inflation, the committee will raise rates to discourage borrowing and spending. When the economy slows, it usually brings a wave of layoffs, which the committee attempts to avoid by lowering rates and encouraging spending. Beth Hammack, president of the Federal Reserve Bank of Cleveland, voted against the rate cut Wednesday, instead wanting to hold rates at their current level. Trump on Wednesday morning wrote on Truth Social that he believes that interest rates should be lowered.

Sen. Mike Rounds of South Dakota pushed back against Warren’s rhetoric, saying that there haven’t been any changes in laws or rules Bonds and stocks difference on consumer protection and that banks are still subject to audits and supervision from other regulators. The CFPB saga unraveled over the weekend with Russell Vought, recently confirmed as director of the Office of Management and Budget, taking over as the agency’s acting director late Friday. CFPB employees were then informed on Sunday that the agency’s headquarters in Washington, DC, would be closed this week.

Keys to the ‘cursed words’ of the Fed’s new roadmap

Under his watch, the Fed has increased interest rates to combat rising inflation. The Federal Reserve is the central bank of the United States, created in 1913 to manage the country’s monetary policy. The current view of Fed officials on the labor market could be one of the big takeaways from Powell’s press conference Thursday, according to James Ragan, director of wealth management research at D.A. The central bank’s move came in as expected, and it will likely continue taking a measured approach going forward, said Greg McBride, chief financial analyst at Bankrate. “Just in principle, it’s possible that any administration’s policies or policies put in place by Congress could have economic effects over time,” he said. “So, along with countless other factors, forecasts of those economic effects would be included in our models of the economy and would be taken into account.”

Powell’s role as a negotiator of the deal to hand over the Chagos Islands to Mauritius with a lease on the US base on Diego Garcia earned him the disapproval of the Conservatives. His return to government, along with Peter Mandelson, Alan Milburn, Michael Barber and Liz Lloyd (Powell’s deputy chief of staff in Blair’s No 10), brought Starmer the disapproval of the Blair-hating minority in the Labour Party. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chair of the Federal Reserve.2 His nomination was confirmed by the United States Senate on January 31, 2018 and took office on February 5, 2018. The central bank leader appears before the House Financial Services Committee to deliver prepared remarks then participate in a question-and-answer session with lawmakers.

In the Blair government, he invented the modern role of the “political” chief of staff to the prime minister and made it work so well, despite the jealousy of the senior civil service, that it has been maintained by every prime minister since. Powell has two qualities that make him the right person at the right time for the Starmer government. I described him in a profile in 2003 as “driven, devoted and discreet”. In an unusual family dynamic, he made himself as indispensable to Blair as his brother Charles, 15 years his senior, had been indispensable to Margaret Thatcher.

Yet Powell also said there were other considerations the Fed has to take into account when deciding whether to keep its rate unchanged, or even raise rates. For example, Powell suggested tariffs might have more than just a one-time impact “if it turns into a series” of tariff hikes, or “if the increases are larger, that would matter.” The Fed has raised interest rates four times since 2015, gradually lifting the cost of borrowing. It has also started to reduce its balance sheet of Treasuries and mortgage-bonds, allowing securities to mature without reinvesting. Judged on those terms, Jerome Powell, whom the president named this week to lead the US central bank, is a bit of a surprise. Powell’s career began in law but soon transitioned into the world of finance and investment banking.

• Taylor Tompkins has worked for more than a decade as a journalist covering business, finance, and the economy.
• Again, Powell did say there’s a lot of uncertainty around the Trump administration policy changes and their effect on the economic outlook.
• The central bank’s move came in as expected, and it will likely continue taking a measured approach going forward, said Greg McBride, chief financial analyst at Bankrate.
• Powell said he expects this will fall to 3.9% by the end of 2025 and to 3.4% by the end of 2026.
• That means Wednesday’s developments could affect your budget going into the new year.
• Central bank policymakers reduced the key interest rate by a quarter point, bringing the target rate to 4.5% to 4.75%.

It’s the latest of several comments that the president has made about monetary policy. They raised their projection of the PCE index (a personal consumption expenditures deflator that the Fed uses as a benchmark for inflation) from 2.5% to 2.7% by the close of 2025. Powell admitted the effect of Trump’s erratic trade policy without criticizing it.

Most other measures of inflation expectations show heightened uncertainty — something Luzzetti said could be a precursor to higher expectations if inflation stays elevated. The modern US economy, DeBusschere said, has not been through such an aggressive slate of tariffs before, and therefore stating that inflation could be transitory because of the tariffs “seems like a fair way to think about it.” “I agree the word transitory is probably not ideal given they used it last time,” 22V Research president Dennis DeBusschere told Yahoo Finance, but Powell also made it quite clear that Fed officials “weren’t sure what was going to happen.” Tariffs, according to Powell, may not be as inflationary as some expect. It’s possible that the added cost of tariffs may be partly absorbed by the manufacturer, distributor, and retail outlets, leaving less for the consumer to pay. Also, if tariffs are short lived, existing inventories may be enough to bridge the gap.

• The current view of Fed officials on the labor market could be one of the big takeaways from Powell’s press conference Thursday, according to James Ragan, director of wealth management research at D.A.
• Both sound bad and mark the central bank’s new roadmap, where recession risks have “increased, but are not high,” according to Powell.
• Because it encompasses not just stocks but pretty much every other financial asset too.
• During his working years from the late ’90s to the early 2000s, Powell was a partner with the private equity firm, Carlyle Group.
• William Heyman, chief investment officer at insurer The Travelers Cos, who knows Mr Powell from that period and counts him as a friend, described him as “bipartisan to the point of being almost non-partisan”.

Powell also had some exchanges with lawmakers over tariffs and China’s trade practices, though he didn’t wade too deep into that discourse, as expected. Last week, however, Trump said the Fed holding interest rates steady at its last meeting was “the right thing to do,” reversing his previous rhetoric calling for lower rates. Federal Reserve Chairman Jerome Powell told reporters Thursday he would not step down from his appointed position if Donald Trump asked him to, saying he’d have no obligation to leave if the president requested it before the end of his term in 2026. During his working years from the late ’90s to the early 2000s, Powell was a partner with the private equity firm, Carlyle Group.

From 1990 to 1993, Powell served as an assistant secretary and as undersecretary of the U.S. Department of the Treasury under then-President George H.W. Bush, with responsibility for policy on financial institutions, the Treasury debt market, what is cfd trading and related areas. The rate on a 30-year fixed mortgage was 7.09% as of the week of Nov. 1, sharply higher than the 4.29% in March 2022.

Indeed, Powell pointed to the labor market’s resilience as a key bright spot in the US economy, adding that any unexpected weakening could force central bankers to resume cutting sooner. Powell said Trump’s tariffs was a factor contributing to officials’ higher inflation forecasts for this year, but he noted that it’s difficult to gauge how much of the higher inflation expected this year will be due to the president’s trade war. All 12 Fed officials with voting power voted in favor of Wednesday’s decision to hold interest rates steady, though Fed Governor Christopher Waller dissented to a decision to slow the pace of the central bank’s offloading of securities on its balance sheet. Standing pat also allows Fed policymakers to see how the Trump administration’s flurry of policy changes ultimately affects the US economy, he said.

The independence of the Federal Reserve may also be a hot subject in the hearing, especially in the context of Trump’s blitz to rapidly reshape government umarkets forex broker overview policy via executive order. In the past, Trump has clashed with Powell and criticized him for keeping rates too high. Powell said he expects this will fall to 3.9% by the end of 2025 and to 3.4% by the end of 2026.

This is the current salary of the sitting chair of the Fed, Jerome H. Powell. In addition to service on corporate boards, Powell has served on the boards of charitable and educational institutions, including the Bendheim Center for Finance at Princeton University and the Nature Conservancy of Washington, D.C., and Maryland. Prior to joining the FRB, from 2010 to 2012, Powell was a visiting scholar at the Bipartisan Policy Center in Washington, where he focused on federal and state fiscal issues.