Powell says Fed will wait-and-see on White House priorities

Federal Reserve Chair Jerome Powell said the central bank is adopting a wait-and-see approach to assessing the impact of the Trump administration’s policy changes on trade, immigration, fiscal policy and regulation.

Speaking at the University of Chicago Booth School of Business’s 2025 U.S. Monetary Policy Forum in New York on Friday, Powell stressed that monetary policy should be carefully considered, focusing on the overall impact of new policies. He emphasized that the Fed will wait for greater clarity before deciding how to proceed.

“While there have been recent developments in some of these areas, especially trade policy, uncertainty around the changes and their likely effects remains high,” he said. “As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves.”

Powell said the central bank’s policy is not on a “preset course,” stating that the Fed would maintain restrictive policy if inflation remains high but would adjust if the labor market weakens or inflation declines more quickly than expected.

While the central banker stated that no interest rate changes are imminent, he noted that the Federal Open Market Committee’s second five-year review of its monetary policy framework is underway. The review — previewed by Powell in November — evaluates the U.S. monetary policy framework, its strategy, tools and public communication to assess whether adjustments to the current approach could better achieve the Fed’s dual mandate of maximum employment and stable prices.

“The 2% longer-run inflation goal will be retained and is not a focus of the review,” he said. “We will hold outreach events around the country involving a wide range of parties, including Fed Listens events [and] are open to new ideas and critical feedback.”

Powell described the current economy as resilient despite uncertainty, with solid growth, a stable labor market and inflation gradually moving toward the Fed’s 2% target. He pointed to continued economic expansion, highlighted by a 2.3% annual GDP growth rate in the fourth quarter of 2024. 

However, he stressed that policymakers remain cautious, referencing recent household surveys that show Americans’ anxiety about the future, while noting that such measures of consumer sentiment have not reliably predicted consumption growth in recent years.

“It remains to be seen how these developments might affect future spending and investment,” he said, adding that consumer spending appeared to moderate in recent months when compared with the previous year. “We continue to carefully monitor a variety of indicators of household and business spending.”

On the labor market, Powell described conditions as “solid and broadly in balance,” with wage growth outpacing inflation. February’s jobs report showed 151,000 new payroll additions, with unemployment at 4.1%. Despite month-to-month fluctuations, the central banker said job growth has averaged 191,000 per month since September.

“The jobs-to-workers gap has narrowed, and the quits rate has moved below pre-pandemic levels,” he said. “With wage growth moderating and labor supply and demand having moved into better balance, the labor market is not a significant source of inflationary pressure.”

Inflation has dropped from its mid-2022 peak of over 7% without triggering a sharp rise in unemployment — an “unusual and most welcome” outcome, according to Powell.

While progress has been broad-based, recent inflation readings remain slightly above target, he said, with core PCE prices rising 2.6% over the past year. He noted that inflation can be volatile, and the Fed does not overreact to short-term fluctuations. Recent increases in near-term inflation expectations — potentially influenced by tariff policies — bear watching, but long-term expectations remain anchored around 2%.

“The path to sustainably returning inflation to our target has been bumpy, and we expect that to continue,” Powell said. “We see ongoing progress in categories that remain elevated, such as housing services and the market-based components of nonhousing services.”