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(Bloomberg) -- It’s not a skip, it’s a pause — and maybe an extended one.
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Federal Reserve Chair Jerome Powell made clear on Wednesday the US central bank intends to hold interest rates in a range of 4.25%-4.5% for the foreseeable future, pointing to a number of reasons why he and his colleagues expect to take their time before lowering borrowing costs again.
Chief among them: the wide uncertainty over how President Donald Trump’s policies — in areas such as immigration, tariffs, fiscal policy and regulation — could upend their expectations for the economy.
“The committee is very much in the mode of waiting to see what policies are enacted,” Powell told reporters following the Fed’s decision to leave rates unchanged. “We need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications for the economy will be.”
The strong performance of the US economy and stability of the labor market also gives Powell and his colleagues room to hold off on further rate cuts. “We do not need to be in a hurry,” he said — an idea he repeated four more times during the 50-minute press conference.
Treasury yields rose following the Fed’s decision, before retreating during Powell’s press conference. The S&P 500 index of US stocks closed lower. Investors are fully pricing in a first cut by July, with a 80% chance of a second by December.
Trump Tensions
The pause is likely to create tension with Trump, who frequently pressured the Fed during his first term to lower rates, and just last week said he knows more about interest rates than Powell.
Trump ramped up his critiques of the US central bank after Wednesday’s meeting. “Jay Powell and the Fed failed to stop the problem they created with Inflation,” he posted on the social media website Truth Social.
A Federal Reserve spokesperson declined to comment on President Trump’s Truth Social post.
Powell downplayed some of the unknowns surrounding Trump’s plans, saying they would be cleared up in time. “There’s probably some additional uncertainty but that should be passing,” Powell said. “It’s a very large economy and policies affect it at the margin. But, we’re going to wait and see.”
Trump uncertainty wasn’t the only thing thing Powell cited.