Powell: Nobody expects a rate hike at the next meeting; a rate hike is not anyone's base case.
PANews reported on January 29th that, according to Cailian Press, Federal Reserve Chairman Jerome Powell stated that the current policy stance is appropriate and conducive to progress in achieving both objectives. Data since the last meeting shows a significant improvement in growth, placing the Fed in a favorable position to address the risks of its dual mandate. It is difficult to conclude from the latest data that policy is clearly restrictive; the Fed will focus on key target indicators and let the data guide the direction. No comment was made on the US dollar. The significant impact of tariffs has already been transmitted through the US economy, and tariffs may lead to a one-off price increase. Most of the higher-than-expected inflation is due to tariffs rather than demand. Core PCE, excluding the impact of tariffs on goods, is slightly above 2%. The impact of tariffs on goods is expected to peak this year and then decline. The US unemployment rate has shown some signs of stabilization, and the labor market, after a gradual softening, may be stabilizing, with little change in hiring, job openings, and wage growth.
Powell stated that if tariff inflation peaks and then declines, it would indicate that the Federal Reserve can ease policy. He expects tariff inflation to peak in mid-2026. However, he also noted that downside risks to the labor market must be monitored. The policy rate is within a reasonable range of the neutral rate, placing the Fed in a favorable position to determine the magnitude and timing of additional rate adjustments. He reiterated that there is no predetermined path for policy, and decisions will be made at each meeting. No one expects a rate hike at the next meeting, and a rate hike is not anyone's base case. He does not believe the Fed will lose its independence. He argued that if the Fed loses its independence, its credibility will be difficult to restore and advised the next Fed chairman to distance himself from American politics.
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