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Federal Reserve Chair Jerome Powell offered investors a consistent message on Wednesday: patience.
Time and again, the chair came back to the idea that the Fed has an ability, and an obligation, to wait and see how developments evolve on tariff policy and any economic distortions that follow.
The first distortion, as the Fed noted in its policy statement, came from export data that dragged down first quarter GDP. Powell also noted survey data reflects considerable uncertainty among businesses and households. And ongoing trade negotiations make the outlook hard to peg too.
“For the time being, we’re well-positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said in prepared remarks Wednesday. And as the Fed chair’s Q&A evolved, the theme recurred.
But what began as an insistence toward patience eventually announced itself as the outlines of a plan, in the end, not to be preemptive but reactive. Specifically, the central bank will wait and see if things get worse in the US economy. And only then will it be compelled to move.
Back in 2019, Powell noted the economy showed some signs of weakening and, with inflation running below the Fed’s 2% target, the central bank cut rates three times to stave off a further slowdown. Before the pandemic rocked the global economy, the Fed and markets enjoyed what some called one of the “easiest years ever for investors.”
In 2025, the central bank is in no such situation.
Today, inflation is running above the Fed’s 2% target. The prospect of tariffs likely lifts inflation — even if temporarily — further away from that goal. Powell also acknowledged that some are making forecasts for a weakening economy, even a recession.
“My gut tells me that uncertainty about the path of the economy is extremely elevated, and that the downside risks have increased,” Powell said during his press conference.
In its policy statement, the central bank noted that since March, “Uncertainty about the economic outlook has increased further.” It added, “The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
Still, attentiveness does not create an ability to anticipate.
“In any case, [the current economy is] not a situation where we can be preemptive because we actually don’t know what the right response to the data will be until we see more data,” Powell said.
