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No interest rate cut looms. The Federal Reserve doesn’t need to rush to react to the Trump administration’s new policies, but can wait for further data on their impact, Fed Chair Jerome Powell said.
The Fed is looking at the net impact of the changes to trade, immigration, fiscal policy, and regulation. While there have been recent developments in some of these areas, especially trade, uncertainty as to their effects remains high.
“We are focused on separating the signal from the noise as the outlook evolves,” Powell told a monetary policy forum in New York. “We do not need to be in a hurry, and are well positioned to wait for greater clarity.”
The central bank is ready to hold rates steady for longer if inflation remains sticky, Powell said. It can ease if the labor market weakens suddenly or if price gains slow more quickly than expected, as it seeks to achieve its dual mandate of maximum employment and stable prices, he added.
“Despite elevated levels of uncertainty, the U.S. economy continues to be in a good place,” Powell said, while admitting that some indicators have turned less rosy and that the path to 2% inflation is likely to remain “bumpy.”
Treasury Secretary Scott Bessent told CNBC’s (CMCSA+1.99%) “Squawkbox” that the U.S. economy is “starting to roll a bit,” claiming that the signs of weakness are the result of the Trump administration’s shift of the economy to private investment from public outlays.
“We’ve become addicted to this government spending, and there’s going to be a detox period,” he said, asserting that this administration had “inherited” the current economy from its predecessor.
Many recent cuts, including the near-elimination of USAID and the Consumer Financial Protection Bureau, reflect the Trump administration’s ideological priorities without having a substantial impact on total government outlays.