From CNBC: 2025-03-07 12:38:31

Federal Reserve Chair Jerome Powell testifies before Congress, stating the central bank will wait to see how Trump’s policies impact interest rates. Powell emphasizes uncertainty due to policy changes in trade, immigration, fiscal policy, and regulation. Despite market expectations for rate cuts, Powell indicates the Fed will wait for greater clarity.

Powell’s comments hint at a wait-and-see approach, contradicting market expectations for interest rate cuts. Traders have priced in potential rate reductions, but Powell emphasizes the need to separate signal from noise. The Fed remains focused on the economy and monetary policy as Trump’s policy changes take effect.

Powell speaks positively about the U.S. macro environment, highlighting a strong labor market and inflation moving towards target. However, concerns about inflation persist due to Trump’s tariff talk. Fed’s preferred gauge shows 2.5% inflation rate, excluding food and energy. Powell expects a bumpy path to sustainably return inflation to target.

Fed Governor Kugler sees upside risks for inflation, suggesting holding the policy rate at its current level for some time. The Labor Department reports a gain of 151,000 nonfarm payrolls in February, indicating a solid labor market. Wages are growing faster than inflation, with an annual increase of 4% in average hourly earnings.

Read more: Powell says Fed is awaiting ‘greater clarity’ on Trump policies before making next move on rates