Federal Reserve Chairman Powell Emphasizes in Post-Meeting Remarks That Monetary Policy Is Not Preset, with High Flexibility to Come in the Future

Federal Reserve Chairman Jerome Powell delivered a statement after the interest rate decision meeting. The Fed announced that the target range for the federal funds rate remains at 3.5% to 3.75%. Powell stated that the Federal Reserve will continue to monitor economic data and external risks, guiding inflation back to the target and maintaining a stable labor market. Future monetary policy will be highly flexible. The development of the Middle East situation’s impact on the U.S. economy remains uncertain, and the Fed will continue to focus on risks.

FED: Neutral interest rates are within a reasonable range; the federal funds rate remains unchanged

The Federal Reserve decided to keep the target range for the federal funds rate at 3.5% to 3.75%. Powell pointed out that after lowering rates by 0.75 percentage points from September to December last year, the current rate is within a reasonable estimate of the “neutral interest rate,” which has guided inflation back to the 2% target trajectory.

The Federal Reserve expects the economy to grow steadily

According to the latest economic indicators, U.S. economic activity shows signs of stable expansion, with consumer spending and business fixed investment demonstrating resilience, serving as the main drivers of economic growth. However, the real estate market remains weak under the current interest rate environment, indicating differing sensitivities across industries to monetary policy. Based on the Summary of Economic Projections (SEP), Fed members have raised their outlook for economic growth, estimating this year’s real GDP growth at 2.4% and next year’s at 2.3%, both higher than previous forecasts made in December.

Labor market demand is slowing

The labor market is currently stable but showing signs of sluggish growth. The unemployment rate remained at 4.4% in February and is expected to stay at that level through the end of the year. Over the past year, employment growth has slowed, mainly due to structural factors such as reduced immigration and declining labor force participation, which have limited labor supply growth. Powell noted that labor demand has clearly softened, with little change overall in data including job vacancies, recruitment activity, and nominal wage growth.

Short-term inflation pressures may rise due to Middle East tensions

While inflation pressures have eased from their peaks in 2022, they remain above the long-term 2% target. As of February, the personal consumption expenditures (PCE) price index increased by 2.8% year-over-year, with core PCE at 3.0%. Recent inflation data reflect the impact of tariffs on goods prices. Additionally, tensions in the Middle East have led to rising oil prices, which could temporarily boost overall inflation. However, the long-term effects on the U.S. economy remain uncertain. The Fed expects this year’s PCE inflation rate to be 2.7%, and next year’s to decline to 2.2%. These forecasts have been slightly revised upward from previous assessments, indicating ongoing challenges in fighting inflation.

Fed Chair Powell emphasizes future monetary policy will be highly flexible

Powell stressed that future monetary policy will not follow a preset path but will be a highly flexible decision-making process. The appropriate level of the federal funds rate by the end of this year is projected to be 3.4%, and 3.1% by the end of next year. These estimates are consistent with assessments from the end of last year. The Fed will adjust rates at each meeting based on the latest economic data, outlook changes, and risk balance. The core goal remains pursuing maximum employment and price stability. Regarding external uncertainties such as the Middle East situation, the Fed will closely monitor the related risks’ impact on the U.S. economy.

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