After the Federal Reserve decided to hold interest rates steady at its March FOMC meeting on Wednesday, Fed Chair Jerome Powell stated that inflation progress may be delayed as the central bank assesses the impact of tariffs.
Yahoo Finance senior Fed reporter Jennifer Schonberger highlights the biggest moments and takeaways from Powell's press conference on Wednesday.
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The buzzword of the press conference today was uncertainty. Chair Powell remarking just how uncertain this environment is and noting that when it comes to the outlook for rate cuts this year. Aside from that, lots of talk about inflation. Chair Powell now saying that progress on inflation may have been delayed for this year. And that the Fed's outlook for inflation has increased in large part because of expectations around tariffs. The Fed chair said it's going to be difficult to parse out just how much of the increase of inflation is coming from tariffs versus other sources. He did say it's too soon to say whether tariffs will result in just a one-time price increase, though the base case right now is that the effect from tariffs on inflation will be transitory. Take a listen.
I think that's kind of the base case, but as I said, it's we really can't know that. Uh, we're going to have to see how things actually actually work out. And the fact that there wasn't much change, I think that's that's partly because, you know, you see, you see weaker growth, but higher inflation, they kind of offset. And also, frankly, a little bit of inertia when it when it comes to changing something in this highly uncertain environment.
Fed Chair Powell reiterated that the Fed does not need to be in a hurry to lower rates, and that policy is well-positioned right now. The costs of waiting for clarity are still low. He did also get questioned about whether the odds for a recession have risen, and he actually ended up pointing to outside forecasts, noting that yes, odds have risen, but risen from a very low level last year, and are still low. There's always still a one-in-four chance that you could have a recession, so sort of dodging that a bit. He also talked about inflation expectations, given that inflation expectations have ratcheted up higher in the short term. But he noted that long-term expectations still remain anchored based on surveys, and based on looking at breakevens in the marketplace if you look at tips versus nominal treasuries. Though he says the Fed is closely watching that. I also asked him about whether the Fed is willing to have a recession to break the back of inflation, given the lessons from the 1970s that many Fed officials have said that they need to heed at this point. And Fed Chair Powell basically said, "Luckily, we are nowhere near a 1970s scenario right now." Lastly, just on that balance sheet, slowing the runoff there, he says that's not intended to send a signal of any sort, they just like the idea of taking a slower course on that balance sheet runoff.
