Fed Holds Rates Steady—Powell Warns of Inflation and Jobs Pain Ahead

No surprises from the Fed today—rates stay frozen as Jerome Powell plays whack-a-mole with sticky inflation and a wobbling labor market.

The Chair’s poker face cracked just enough to admit what markets already know: the ’soft landing’ fantasy is getting turbulence. Unemployment ticks up? Inflation refuses to die? Suddenly those 2024 rate cut bets look like Wall Street hopium.

Bonus jab: Another masterclass in central bank telegraphing—where ’data dependence’ means kicking the can until after the election.

Future rates to be determined

While the Fed did not signal an imminent rate hike or cut, it emphasized that future adjustments to interest rates would depend on incoming data and evolving risks. 

Fed Chair Powell said the inflation outlook is improving, but tariff impacts are uncertain and the Fed will act quickly if needed, though timing remains unclear. Powell said the Fed sees encouraging inflation trends, will learn more about tariffs over time, and is ready to act quickly if needed, though the timeline remains uncertain.

The central bank reiterated its long-term targets of maximum employment and 2% inflation, adding that it is prepared to alter policy if new risks threaten those goals.

At its March meeting, the Fed had already announced a slowdown in its balance sheet reduction strategy, capping monthly redemptions of Treasury securities at $5 billion starting in June, while keeping the cap for mortgage-backed securities at $35 billion.

All voting members of the committee supported the decision, with Neel Kashkari participating as an alternate.