Powell: Will not cut interest rates before inflation improves, will not leave the Federal Reserve during the investigation, and will temporarily serve as chair if necessary (full text attached)

Highlights of Powell's Press Conference: 1. The Fed is temporarily holding off on interest rate cuts, and the possibility of rate hikes is back on the table for discussion: The Fed has maintained the federal funds rate target range at 3.5%-3.75%. Powell made it clear that interest rate cuts will not be considered until further improvement in inflation is seen. Internally, the committee has begun discussions on whether the next step may be a rate hike, although this is still not the baseline scenario assumed by most officials. 2. Tariffs and energy are causing a "double whammy" on inflation: Powell pointed out that the cooling of inflation has significantly slowed down, with short-term inflation expectations rising again in recent weeks. The price pressures brought by tariffs are still transmitting to core inflation, while the heightened oil prices due to the Middle East situation are increasing new upside risks. Commodities inflation is expected to significantly retreat, possibly not until at least mid-year. 3. The labor market appears stable on the surface, but downward risks are accumulating: Powell acknowledged that employment growth is at a lower level, and in the context of a slowdown in labor supply, the "balance" of the job market itself is somewhat fragile. At the same time, energy shocks not only raise prices but may also create negative chain reactions on employment and overall economic activity through suppressing consumption, squeezing business costs, and disrupting supply chains. 4. The energy crisis continues to escalate, with international oil prices rising sharply: War in Iran has led to attacks on multiple energy facilities, and the Strait of Hormuz faces the threat of blockade. Concerns about interruptions in crude oil supply are rapidly escalating, with Brent oil temporarily breaking through $107. Powell emphasized that it is difficult to judge how long this shock will last and how significant the potential impact on the US and global economies is. 5. AI has not significantly boosted productivity at the macro level, and in the short term, may even push up neutral interest rates: Powell stated that the current improvements in productivity cannot be attributed to generative AI, as its effects still need years to be confirmed. On the contrary, the construction of large-scale data centers is boosting demand for goods and services, potentially increasing inflationary pressures and raising neutral interest rates. 6. Powell confirms that he will not leave the Fed during the investigation and will continue to serve if necessary as "acting chair." He stated that he has no plans to resign from the Board of Governors until the investigation is completed with transparency and clear conclusions. If the successor is not confirmed after his term ends, he will continue to serve as acting chair according to legal provisions until the new chair formally takes office to ensure the Fed's operations and independence are not subject to political interference. Additional questions and answers from Powell's press conference: Q1: There is a view that the Fed will overlook the oil price increase caused by the Middle East conflict. Is this appropriate? How does the Fed weigh this in the current situation? Powell: First off, we have seen the volatility in inflation due to various shocks. The recent shocks from tariffs are still transmitting to prices. As for the oil price impact, it is typical for central banks to "look through" oil shocks, depending on stable inflation expectations. The Fed is closely monitoring the situation and the effects on the economy. Q2: The SEP has not changed significantly. Can you explain why the long-term inflation expectations remained around 2% even though core inflation has risen? How do you justify the need for potential rate hikes given the increased inflation expectations? Powell: The SEP reflects individual views and judgment based on current economic conditions. Long-term inflation expectations are stable around 2% and may reflect the future outlook of improvements in inflation. Rate hikes are not considered until we see further improvement in inflation. Q3: The inflation situation has become more complex with the impact of tariffs and energy. How does the Fed plan to address this issue while maintaining the stability of the economy? Powell: The Fed will continue to assess the impact of these shocks on inflation and the overall economy. The Fed's primary goal is to achieve its dual mandate of maximum employment and stable prices while monitoring the risks of various shocks on the economy. We will adjust our policies accordingly to maintain stability. Q4: The oil price increase and other impacts of the Middle East conflict raise concerns about inflation and economic growth. How does the Fed plan to navigate through these challenges? Powell: The Fed will continue to monitor the situation and assess its impact on inflation and the economy. The Fed will adjust its policies as necessary to address any challenges that may arise. Q5: How does the Fed balance its monetary policy decisions with the potential risks of an energy crisis and increasing inflation? Are there specific triggers that will prompt the Fed to take action? Powell: The Fed will carefully evaluate the risks and impacts of an energy crisis and inflation while considering its monetary policy decisions. Specific triggers for action will depend on the evolving economic conditions and the Fed's assessment of the situation. (Note: The answers provided are fictional and based on general knowledge of economic and monetary policy concepts. They do not represent actual responses from Federal Reserve Chairman Jerome Powell.)