Powell's Press Conference Briefing: Tariff-Driven Inflation Will Be More Pronounced, More Information Needed for Interest Rate Cut

After the US Fed held rates steady for the fourth consecutive time while releasing a telling economic forecast, Fed Chairman Powell appeared before global media to explain the latest policy decision.

As context for the press conference, Fed officials unanimously voted Wednesday to keep rates unchanged, but in their economic projections,they raised the median inflation forecast for the US this year from 2.7% in March to 3%,while slashing this year'sGDP growth projection from 1.7% to 1.4%.

The closely watched "dot plot" for interest rate cuts also showed greater divergence. Although the median projection still indicates two rate cuts this year,the number of officials forecasting no cuts rose from four to seven,while those predicting at least two cuts decreased by one compared to three months ago. Moreover, the reduced rate cut projections for 2026 and 2027 were made by officials against a backdrop of deteriorating macro outlook.

"Tariff-driven price increases" will become more pronounced

At the press conference, Powell again emphasized no urgency for policy adjustments, stating that under current economic conditions,the US Fed is "well positioned to wait and gain further clarity about the likely path of the economy."He also noted current monetary policy is in a state of "moderately restrictive," contrasting markedly with March's description of being "clearly in restrictive territory."

The biggest macro uncertainty now lies in how US tariff policies will affect inflation, employment, and economic trends.

Powell addressed this directly, stating: "We've already seen some modest increase in goods inflation, and we do expect this to become more apparent over the course of this summer."

He stressed it takes time to see tariffs' full impact across the goods distribution chain, as many products currently sold by retailers were imported months before the tariff hikes. He added: "We're beginning to see some effects,and expect to see more in coming months.We have indeed observed price increases in some related categories, such as personal computers and audio-visual equipment, attributable to the tariff hikes."

For this reason, Powell noted maintaining the current policy stance ("hold where we are") is appropriate.

Regarding dot plot changes, Powell acknowledged "no one has high confidence in these rate paths,"but expects to gain deeper insights about tariffs throughout the coming summer.

"This process is extremely difficult to predict, and we have never experienced a situation like this before. I think we must remain humble about our ability to forecast," said the Fed Chairman.

He also emphasised that, considering the issue of tariffs, the US Fed needs to be confident that inflation is declining before it can begin to cut interest rates.

Powell also mentioned the ongoing review of the policy framework, indicating that when the results are available by late summer, adjustments to the way a range of policy communications are made may be considered.

A Cold Response to Tenure Questions

Regarding the White House's renewed call for an interest rate cut on Wednesday, Powell merely stated that Fed officials are committed to fostering a robust economy, which is virtually all they "care about."

Meanwhile, when asked about his own career prospects, Powell responded with a cold face, saying he had not considered the issue.

It is understood that Powell's term as Fed Chairman will expire in May next year, but his term as a Fed Governor will not end until January 2028.

A Subtle Jab at the "Department of Government Efficiency"

Of course, Powell is not entirely without a temper. When asked about the Fed's recent announcement of layoffs, he delivered a response that was "full of hidden meanings."

As background, Powell stated during congressional hearings earlier this year that there was no issue of overstaffing at the Fed, but he recently announced that it would lay off 10% of its staff over the next two years.

In response on Wednesday, he said, "We will identify 10% of our employees who are qualified for other positions. The Fed can streamline its operations, and this will not pose a risk to our ability to carry out our critical missions."

Powell said pointedly, "This is how professional operations should be conducted. You need to act with caution, think deeply, and plan thoroughly."

Concerns Over "Difficulty in Finding Employment" for the Unemployed

Powell also pointed out that there is a phenomenon in the US labour market known as "low hiring, low firing."

He said, "If you are unemployed, it is indeed difficult to find a job, but currently, there are also very few people being laid off. This is a delicate balance that we are monitoring extremely closely."

He also declined to comment on the issue of artificial intelligence (AI) "taking jobs away," but stated that AI could potentially become a factor in suppressing inflation.