Fed Chair Powell Reiterates Wait-and-See Approach, Emphasizes Data-Driven Policy Adjustment

On June 24 local time, Federal Reserve Chair Jerome Powell testified before the U.S. House of Representatives, presenting the central bank’s semiannual monetary policy report. Powell stated that the Federal Reserve is in a position to remain patient, emphasizing that any adjustment to its policy stance will be made only after gaining a clearer understanding of the likely direction of the U.S. economy.

Powell noted that a strong and sustained labor market benefits all Americans, but such a labor market cannot be achieved without price stability. On inflation, he stated that it has come down significantly from its mid-2022 peak, although it still remains slightly above the 2% target. While short-term inflation expectations have risen slightly in recent months due to tariff influences, most long-term indicators remain consistent with the 2% objective.

Addressing the impact of tariffs, Powell explained that while the effect may be reflected in one-off price adjustments, it could also prove more persistent. The potential duration and magnitude of the tariff effect, the time required for full price transmission, and the stability of long-term inflation expectations will all be determining factors.

Regarding the labor market, Powell indicated that conditions remain solid, with the unemployment rate holding at low levels over the past year. Wage growth has moderated but still exceeds the inflation rate. Overall, labor market dynamics remain broadly balanced and consistent with full employment, without being a major source of inflationary pressure. He also noted that recent labor market strength has helped reduce longstanding disparities in employment and income across demographic groups.

As of the time of publication, CME Group data showed that markets anticipate an 83.5% probability that the Federal Reserve will keep rates unchanged in July, with a 16.5% chance of a 25-basis-point rate cut. For September, there is a 21.5% probability of maintaining current rates and a 66.2% chance of a 25-basis-point reduction.

This testimony follows the Federal Open Market Committee’s decision on June 18 to maintain the federal funds rate target range at 4.25% to 4.5%, marking the fourth consecutive month without a change. In the previous year, the Fed had reduced rates by a total of 100 basis points.