Federal Reserve Chair Jerome Powell reiterated on Friday that the central bank is not in a hurry to cut interest rates as policy uncertainty continues to weigh on markets and cloud the outlook for the US economy.
“As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves,” Powell said in prepared remarks during a speech in New York on Friday.
“We do not need to be in a hurry, and are well positioned to wait for greater clarity.”
The central bank leader added in a Q&A portion following his speech that “the cost of being cautious is very, very low. The economy is fine. It doesn’t need us to do anything, really, so we can wait and we should wait.”
On Friday, February’s jobs report offered some relief to investors concerned about the health of the US economy, as 151,000 jobs were added last month, more than the 125,000 jobs seen in January. The unemployment rate ticked up slightly to 4.1% from 4%.
“Many indicators show that the labor market is solid and broadly in balance,” Powell said in reaction to the data. “Smoothing over the month-to-month volatility, since September, employers have added a solid 191,000 jobs a month on average.”
Markets were still pricing in three interest rate cuts following Friday’s jobs report.
In reference to the uncertainties caused by the Trump administration’s policies, Powell again emphasized these changes were coming not only as a result of tariffs, but across immigration, regulation, and fiscal policy shifts, too.
“The new Administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation,” Powell said. “It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy.”
In other words, a one-time spike in prices due to tariffs alone would not be appropriate for the central bank to react to, according to Powell, since restrictive monetary policy would reduce employment and activity at a time when it would not be needed.
“In a simple case where we know it’s a one time thing, the textbook would say look through it,” he said.
Still, Powell cautioned most economists are forecasting some inflationary effects from tariffs that will likely hit exporters, importers, retailers and, to some extent, even consumers. If those effects are significant enough to impact longer term inflation expectations within the context of the current environment, “that would matter,” Powell said.
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