Powell, Jerome H

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Fed Holds Interest Rates Steady, but Trump’s Tariffs Could Slow Inflation Progress

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The Federal Reserve left interest rates unchanged on Wednesday for a second straight meeting. The March meeting was the central bank’s most direct acknowledgment to date that President Trump’s policies are set to have a real impact on the economy, stoking significant uncertainty about where inflation, growth and — ultimately — interest rates are headed. Here are the takeaways:Tariffs took center stage during the news conference with Jerome H. Powell. The Fed chair went as far as saying that tariffs likely mean “further progress may be delayed” on getting inflation back to the central bank’s 2 percent target. That recognition materialized in the higher inflation forecasts that officials penciled into new economic projections. By the end of the year, officials estimate that core inflation, which strips out volatile food and energy prices, will stay stuck at 2.8 percent, before declining to 2.2 percent in 2027.Fed officials paired their higher inflation forecast with lower estimates for economic growth, even as they stuck with previous projections that they would be able to lower interest rates by a half point this year, delivering two quarter-point cuts. The range of possible outcomes was wide, however, with eight policymakers forecasting either no additional cuts or just one this year. Only two thought the Fed would lower rates by 0.75 percentage points, or three cuts of a quarter point this year.In recent months, Mr. Powell has been adamant that the Fed is well positioned to respond to sharp shifts in the trajectory for the economy and could afford to be patient about making rate decisions given the solid foundation of the labor market. He reiterated that point, pushing back on the souring of consumer expectations about inflation and economy that has shown up in recent survey data.While the path forward for interest rates and the economy was the main focus of the March meeting, the Fed’s decision to slow the pace at which it is reducing its balance sheet drew some attention. Mr. Powell said the idea was to reduce the possibility of market ructions in funding markets. More

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    Trump Primed to Clash With Fed After Key Rate Decision

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    President Trump has never been shy about criticizing the Federal Reserve, frequently seeking to pressure the nation’s central bank into reducing interest rates more swiftly.“Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!,” Mr. Trump posted on Truth Social last month, adding: “Lets Rock and Roll, America!!!”But the Fed is expected to see things differently on Wednesday — choosing to hold rates steady in the face of rising prices and slowing growth — in a move that seems destined to stoke Mr. Trump’s anger.At the heart of the tension are Mr. Trump’s tariffs, which he has promised to apply more expansively beginning April 2. The White House contends its protectionist policies can rejuvenate American manufacturing and reduce the country’s reliance on imports, but economists believe that Mr. Trump risks touching off a protracted global trade war that will badly harm the U.S. economy.The latest dour projection arrived Tuesday, when Fitch Ratings cut its U.S. growth forecast for this year to 1.7 percent from 2.1 percent. It explicitly pointed to Mr. Trump’s tariffs — and the “huge uncertainty” around them — as two of the drivers behind a potential economic slowdown and short-term rise in prices.The uncertainty is likely to freeze any rate cutting at the Fed, perhaps straining an already tortured relationship between Mr. Trump and Jerome H. Powell, the man he handpicked to serve as chair of the central bank in 2017.In his first term, the president described Mr. Powell as the “enemy,” and blasted his colleagues as “boneheads,” in a bid to browbeat the Fed into slashing interest rates. Mr. Trump at one point even considered firing Mr. Powell, raising fears that the White House might try to undermine the Fed’s political independence.Soon after returning to the White House, the president revived his attacks: He said, again, that he would “demand that interest rates drop immediately,” and one of his leading advisers — the tech billionaire Elon Musk — signaled support for an audit of the central bank. When the Fed chose to hold rates steady at its last meeting, Mr. Trump charged anew that Mr. Powell and the Fed had “failed to stop the problem they created with inflation.”“If the Fed had spent less time on DEI, gender ideology, ‘green’ energy, and fake climate change, Inflation would never have been a problem,” Mr. Trump wrote in a post on Truth Social. More

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    The Fed’s Projections: How to Read Them Like a Pro

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    Federal Reserve officials are scheduled to release their first set of economic projections this year, alongside their interest rate decision, on Wednesday. Those forecasts will offer a fresh glimpse of the trajectory for monetary policy at a highly uncertain moment for the central bank.Policymakers paused interest rate cuts in January after reducing borrowing costs by a percentage point in the latter half of last year. They are expected to again stand pat on Wednesday as they await greater clarity on how far President Trump will push his global trade war and to what extent he will follow through on other central aspects of his agenda, including slashing government spending and deporting migrants.The big question now is when — and to some extent whether — the Fed will be able to restart cuts this year.When the Fed last released quarterly economic projections in December, officials penciled in two rate cuts that would reduce borrowing costs by half a percentage point in 2025. But economists now expect Mr. Trump’s policies to lead to more intense price pressures and slower growth, a tough dynamic for the central bank and one that could prompt policymakers to scale back how many cuts they project going forward.Here’s what could change and how to interpret those updates.The dot plot, decodedWhen the central bank releases its Summary of Economic Projections each quarter, Fed watchers focus on one part in particular: the dot plot.The dot plot will show Fed policymakers’ estimates for interest rates through 2027 and over the longer run. The forecasts are represented by dots arranged along a vertical scale — one dot for each of the central bank’s 19 officials.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    U.S. Inflation Eased More Than Expected in February

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    Inflation eased more than expected in February, a welcome sign for the Federal Reserve as it grapples with the prospect of higher prices and slower growth as a result of President Trump’s trade war.The Consumer Price Index was up 2.8 percent from a year earlier, after rising another 0.2 percent on a monthly basis. That was a step down from January’s surprisingly large 0.5 percent increase and came in below economists’ expectations.The “core” measure of inflation, which strips out volatile food and fuel prices to give a better sense of the underlying trend, also ticked lower. The index rose 0.2 percent from the previous month, or 3.1 percent from a year earlier. Both percentages were below January’s increases.The data from the Bureau of Labor Statistics underscored the bumpy nature of the Fed’s progress toward its 2 percent goal. Prices for consumer staples, such as eggs and other grocery items, are rising steeply again, but costs for other categories like gasoline fell. A 4 percent drop in airfares in February was a primary driver of the better-than-expected data.Egg prices rose another 10.4 percent in February, as an outbreak of avian influenza continued to exacerbate a nationwide egg shortage. Prices for eggs are up nearly 60 percent since last year. Food prices more broadly rose 0.2 percent, or 2.8 percent from a year earlier.The cost of used cars also rose 0.9 percent in February, although new vehicle prices declined slightly. Car insurance, which was a huge driver of the index’s unexpectedly large increase in January, rose again, but at a much slower pace of 0.3 percent. It is up just over 11 percent over the past year. More

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    Powell Says the Fed Is in No Hurry to Adjust Rates Amid Trump Policy Uncertainty

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    Jerome H. Powell says the Fed is focused on separating “signal from the noise,” as the president whipsaws on tariffs.Jerome H. Powell, chair of the Federal Reserve, said the central bank is focused on the “net effect” of President Trump’s sweeping economic agenda amid high uncertainty about which policies will actually be enacted, as he reiterated that officials are still not in a “hurry” to adjust interest rates.“As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves,” Mr. Powell said at an event on Friday. “We do not need to be in a hurry, and are well positioned to wait for greater clarity.”If inflation stays sticky but the economy remains strong, the Fed chair said the central bank can “maintain policy restraint for longer.” But if either the labor market were to weaken more than expected, or inflation were to rapidly decline, Mr. Powell said officials can “ease policy accordingly.”His comments underscore the delicate balancing act that Fed is trying to navigate at a tenuous moment for the economy.In an interview on Friday, Austan D. Goolsbee, president of the Chicago Fed and a voting member on this year’s policy-setting committee, warned that a situation in which inflation stayed sticky while growth deteriorated at the same time would be a “harder problem” for the Fed to solve and something that is increasingly “on the radar screen” as a result of the policies that Mr. Trump is pursuing.“Tariffs on intermediate goods are a negative supply shock,” he said, referring to goods that are used to make other products and services for consumers. “If there were large negative supply shocks that were to hit the economy, they would have a tendency to both drive down employment and drive up prices.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Trump Tests Fed’s Independence With Order Expanding Authority Over Agencies

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    The Federal Reserve’s independence from the White House has long been enshrined in the law. But an executive order that President Trump signed this week seeking to extend his administration’s reach over independent agencies is prompting concerns about how much further he will go to challenge that separation.Mr. Trump’s directive took aim at regulatory agencies that had typically operated with limited political interference as authorized by Congress.The order partly shielded the Fed by exempting the central bank’s decisions on interest rates. Those are voted on at every meeting by seven presidentially appointed members of the Board of Governors, who typically serve 14-year terms, as well as a rotating set of five presidents from the regional reserve banks.But the order sought to exert authority over how the Fed oversees Wall Street, decisions that are ratified with majority support by the board.The order was the president’s latest attempt to centralize the executive branch’s power over the government. It requires independent organizations to submit proposed rule changes to the White House for review and gives the Office of Management and Budget oversight of how these institutions spend funds and set priorities. It also asserts that the president’s and the Justice Department’s interpretations of the law are binding and that alternative interpretations require authorization.The expansive nature of the order has raised questions about whether Mr. Trump’s decree is legally applicable to an institution like the Fed. It has also fueled speculation that the president — who has a history of trying to influence the central bank’s decision on interest rates — may eventually turn his scrutiny to monetary policy decisions.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Solid Labor Market Gives Fed Cover to Extend Rate Pause

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    Less than six months ago, Federal Reserve officials were wringing their hands about the state of the labor market. No major cracks had emerged, but monthly jobs growth had slowed and the unemployment rate was steadily ticking higher. In a bid to preserve the economy’s strength, the Fed took the unusual step of lowering interest rates by double the magnitude of its typical moves.Those concerns have since evaporated. Officials now exude a rare confidence that the labor market is strong and set to stay that way, providing them latitude to hold rates steady for awhile.The approach constitutes a strategic gamble, which economists by and large expect to work out. That suggests the central bank will take its time before lowering borrowing costs again and await clearer signs that price pressures are easing.“The jobs data just aren’t calling for lower rates right now,” said Jon Faust of the Center for Financial Economics at Johns Hopkins University, who was a senior adviser to the Fed chair, Jerome H. Powell. “If the labor market seriously broke, that may warrant a policy reaction, but other than that, it takes some progress on inflation.”Across a number of metrics, the labor market looks remarkably stable even as it has cooled. Monthly jobs growth has stayed solid and the unemployment rate has barely budged from its current level of 4.1 percent after rising over the summer. The number of Americans out of work and filing for weekly benefits remains low, too.“People can get jobs and employers can find workers,” said Mary C. Daly, president of the San Francisco Fed, in an interview earlier this week. “I don’t see any signs right now of weakening.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More