After the Fed left interest rates unchanged and two Fed members voted against it, Chairman Jerome Powell made a statement and answered questions live on air.
Here are all the highlights from Powell’s speech:
- The economy is in a solid position.
- Inflation is slightly above targets.
- The current policy stance puts us in an advantageous position.
- The Fed remains focused on its dual mandate objectives.
- Indicators show that economic growth is slowing.
- The slowdown in growth reflects a slowdown in consumer spending.
- Housing sector activity remains weak.
- The unemployment rate remains low and within a narrow range.
- Labor market conditions are generally stable.
- Overall indicators show that the labor market is close to full employment.
- Wage growth has slowed but is still above inflation.
- Core personal consumption expenditures (PCE) may rise 2.7% year-over-year in June.
- While inflation has decreased compared to 2022, it remains high. Most indicators of long-term inflation expectations are consistent with the Fed’s targets.
- Customs duties have pushed up the prices of some goods.
- The impact of the government’s policy changes remains unclear.
- Inflation can be short-term or more persistent.
- A reasonable baseline scenario is that the impact of tariffs on inflation will be short-lived.
- The policy review is expected to be completed by the end of summer.
- Data to be released soon will help the Fed determine its future policy direction.
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The Federal Open Market Committee (FOMC) voted 9-2 to maintain interest rates at their current levels. Fed Governors Michelle Bowman and Christopher Waller voted against the decision. Both officials have previously advocated for easing monetary policy.
This situation brings to mind the last time multiple administrators opposed an interest rate decision in late 1993. This kind of divergence, not seen within the Fed for a long time, indicates that differing approaches to monetary policy are becoming increasingly evident.
*This is not investment advice.