Federal Reserve Chair Jerome Powell is signaling patience, noting that the central bank remains "well positioned" as the labor market shows signs of stabilization.
"We will continue to make our decisions meeting by meeting… letting the data light the way for us," Powell said on Wednesday following the Federal Open Market Committee's decision to keep rates unchanged at 3.5%-3.75% .
Powell Pushes Back Against Political Pressure, Reaffirms Fed Independence
Powell declined to engage with political criticism related to ongoing legal scrutiny of the central bank, reiterating that he does not respond to comments from other officials.
"Today, I will simply refer you to the statement I made on January 11. I am not going to expand on it or repeat it," he said.
His attending a recent Supreme Court hearing on the Fed’s Lisa Cook, he says, was driven by the case’s significance.
"That case is perhaps the most important legal case in the Fed's 113-year history," Powell said.
Instead, Powell delivered a strong defense of the Fed's independence, framing it as essential to economic stability rather than institutional self-protection.
"If people lose the faith that we are making decisions only on the basis of what is best for the wide public, rather than trying to benefit one group or another, it is going to be hard to retain it," he said. "And we haven't lost it. I don't believe we will."
Gold
When asked about the historic rally in gold and silver prices, Powell downplayed their macro signal. He also rejected the idea that the moves reflect a loss of Fed credibility.
Powell said the Fed remains focused on inflation expectations rather than individual asset prices. "If you look at where inflation expectations are, our credibility is right where it needs to be,” he added.
Indeed, the Fed monitors markets, but it does not react to swings in specific assets, he explained. "We don't get spun up over particular asset price changes, although we do monitor them, of course."
Inflation Still Elevated, Tariffs a Key Factor
Inflation remains "somewhat elevated" relative to the Fed's 2% goal, with Powell pointing to tariffs as a major contributor to stubbornly high goods prices.
Core personal consumption expenditures inflation – the Fed’s favorite price pressure indicator – ran near 3% over the 12 months ending in December, showing little progress from the prior year.
“Most of the overrun in goods prices is from tariffs," Powell said.
"That's actually good news. If it weren't from tariffs, it might mean it's from demand, and that's a hard problem to solve."
Powell indicated services inflation continues to cool while goods prices remain distorted by tariff effects.
Disinflation is more visible in services, according to Powell. The Fed expects the tariff-related inflation impact to fade by mid-2026, assuming no new major tariff hikes.
"We do think tariffs are likely to move through and be a one-time price increase," he said.
When Will The Fed Cut Again?
Powell made clear that the central bank is not on a preset easing path.
"We haven't made any decisions about future meetings," he said. "We are well positioned after the three cuts to let the data speak to us."
Since September, the Fed has lowered rates by roughly 75 basis points, bringing policy closer to neutral. Powell said many officials no longer view policy as meaningfully restrictive.
"It is hard to look at the incoming data and say that policy is significantly restrictive at this time," he said.
Asked whether the next move could be a rate hike, Powell said that scenario is not currently expected.
"It is not anybody's base case right now that the next move will be a rate hike," he said, "but ultimately we will do what we think is the right thing."
As for Powell’s successor? Powell offered a simple message: "Don't get pulled into elected politics."
Market Reactions
The U.S. dollar extended its slide following Powell's press conference. The Fed chief declined to address questions tied to the recent weakness in the greenback.
The U.S. Dollar Index (DXY) fell to around 96.40, trimming earlier session gains.
U.S. equities were little changed. The S&P 500 — tracked by the Vanguard S&P 500 ETF (NYSE:VOO) — edged down about 0.1% on the session.
Meanwhile, gold prices surged more than 4% to around $5,390 per ounce, with most of the move unfolding during Powell's remarks.
The yellow metal — tracked by the SPDR Gold Shares (NYSE:GLD) — is now up roughly 25% this month, putting it on track for its strongest monthly performance since January 1980.
Gold mining stocks extended their rally, as the VanEck Gold Miners ETF (NYSE:GDX) climbed 2.5% on the session and has now surged 30% this month, heading for its best performance since April 2020.
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