Federal Reserve Chair Powell: Current stance is watchful waiting

Federal Reserve (Fed) Chair Jerome Powell provided additional insights during his recent congressional budget committee testimony on Tuesday, emphasizing a cautious approach towards interest rate cuts, which are not anticipated until possibly the fourth quarter of the year.

Key highlights from Powell’s Testimony

Rate cuts will resume when conditions are deemed appropriate.
Tariffs are expected to impact consumer prices to some extent.
Anticipate the onset of tariff-related inflation starting June.
The Fed will adapt its strategy as more data becomes available over the summer.
There’s a possibility that the impact of tariffs on inflation could be less severe than expected.
There is no urgency to adjust rates immediately.
Rate reductions will occur if inflation remains under control.
Specific timing for rate cuts remains undecided.
The Fed is exercising caution regarding inflation uncertainties.
Economic slowdown this year is partly due to reduced immigration.
The role of the US oil industry as an economic buffer is now uncertain.
Any significant rise in oil prices will prompt a reevaluation of the economic outlook.
The US dollar will continue to be a dominant global reserve currency.
The impact of mortgage-backed securities runoff on housing costs is minimal.
The Fed will be better positioned to address economic downturns once current adjustments are completed.
The Fed’s approach to reducing its balance sheet is on track.
There is still some reduction to be done on the Fed’s balance sheet.
Credit conditions are slightly stringent for small businesses.
Significant effects from tariffs on inflation are expected by mid to late summer.
An absence of expected inflationary impacts might lead to earlier rate cuts.
The Fed currently maintains a stance of observation and patience.
Overall, the inflation outlook is relatively positive.