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Federal Open Market Committee press conference: Live coverage

Fed Chairman Jerome Powell
Federal Reserve Chair Jerome Powell
Bloomberg News

Heading into Wednesday's Federal Open Market Committee meeting, the question is not what the group will do, but rather what it will say.

In what has been a signature of post-pandemic monetary policymaking, Federal Reserve officials broadcast their policy intentions — holding short-term rates steady between 4.25% and 4.5% — well in advance of this week's meeting. 

What remains to be seen from the FOMC's policy statement and forecasts, as well as Fed Chair Jerome Powell's ensuing press conference, is what the central bank intends to do in the months ahead and, critically, what its reaction function will be in the face of sweeping economic uncertainty. 

"Among a flurry of activities that have economic implications, the new administration's tariff policies and efforts to shrink the federal government seem to have the most influence — for now — on market sentiment," said Chris Stanley, who leads the banking industry practice at the analytics firm Moody's. "It's a big jump from market correction to a recession, but the Fed is confronting a very different growth picture today than the last time they met."

In an analysis note, Stanley advised bankers to plan on no rate cuts for 2025, but to also maintain "an agile, multi-scenario balance sheet playbook."

Should rates remain unchanged through the end of the year, that would be a significant departure from the Fed's policy expectations coming into this year. During its December meeting, FOMC members largely predicted that they would cut rates twice in 2025. And, just a few weeks ago, Fed Gov. Christopher Waller said a third cut could be in the cards. 

FOMC members are set to update their quarterly economic projections during today's meeting, giving the market fresh guidance about what to expect in the months and years ahead.

Waller and other FOMC members have said the Fed will not lower its policy rate until it sees either a sustained drop in inflation or significant softening of the labor market. Government reports showed a slight uptick in unemployment and modest decline in inflation in February, but those reports do not reflect the full impact of government layoffs and business responses to the looming threat of widespread tariffs.

The concern among some economists is that the Fed will feel compelled to cut rates preemptively should the economy start to decline. Early warning signs, including falling 10-year Treasury yields, gloomy consumer sentiment surveys and the Federal Reserve Bank of Atlanta's GDPNow tool, suggest that recession risks are on the rise. But, for now, consumer spending remains strong and the labor market continues to add more than 100,000 jobs monthly.

Mickey Levy, an independent macroeconomic consultant and visiting scholar at the Hoover Institution, said an economic downturn paired with persistent inflation could put the Fed in the uncomfortable position of having to choose between its two statutory mandates: bolstering the labor market and keeping prices stable.

"History suggests the Fed will ease monetary policy in response to the negative impacts of the tariffs on the economy and labor markets," Levy told American Banker. "But in doing so, it could elevate inflation even higher and compound the costs of the tariffs."

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7h 43m ago

Powell: Slower runoff will keep QT going longer

Jerome Powell
Federal Reserve Chair Jerome Powell
Bloomberg News
Fed Chair Jerome Powell said slowing the pace of balance sheet reduction will allow the runoff process to play out longer. 

Powell said the Federal Open Market Committee first began to consider changes to its balance sheet policy when it began observing notable "flows in and out" of the Treasury's General Account during the debt ceiling negotiations. The TGA sits alongside reserves on the liability side of the central bank's books. Powell said reserves in the system remain abundant.

Powell said the committee considered pausing runoff but opted for the slowdown instead. 

"As we thought about it, we really came to the decision that now was a good time to make the move that we made," Powell said. 

He added that lowering the cap on Treasury runoff from $25 billion a month to $5 billion will allow the wind down process, known as quantitative tightening, to carry on longer. 

"If you're cutting the pace of QT in half, the runway is roughly doubled, it's lower for longer and people really liked that," Powell said. "It's like a plane coming in for a landing."

The chair added that the balance sheet reduction is playing out in line with the guidelines the FOMC released in 2022. He also floated the idea of allowing mortgage-backed securities to continue rolling off the Fed's books even once net-run ends.

"We want the MBS to roll off our balance sheet," he said. "We strongly want that, but we haven't made any decisions about that yet."
7h 51m ago

Powell navigates policy minefield

Jerome Powell
Federal Reserve Chair Jerome Powell
Bloomberg News
Federal Reserve Chair Jerome Powell remained noncommittal on a range of policy fronts, including declining consumer sentiment, market volatility, the impact of tariffs and even the future of the Fed's independence. 

In his press conference Wednesday, Powell was asked about whether increases in inflation expectations across a range of metrics appear elevated, largely attributable to President Trump's most recent raft of tariffs, have changed the central bank's view of inflation expectations as well-anchored. Powell said that they have not, because those short-term inflation expectation readings often are not as instructive as long-term market inflation expectation readings, which remain flat.

"You do see increases widely in short-term inflation expectations, and people who fill out surveys … are pointing to tariffs [as the source of] that," Powell said. "If you look a little further out, you don't see much in the way of an increase in long-term inflation expectations. We will be watching all of that very carefully. We do not take anything for granted. But that's what you see right now."

Powell was also asked about deteriorating consumer sentiment, but he similarly said that the hard data on actual consumer spending remains robust despite survey and consumer sentiment indicators suggesting that it has declined. 

"We do see pretty solid hard data still," Powell said. "Growth looks like it's maybe moderating a bit, consumer spending maybe moderating a bit but still at a solid pace, unemployment's still at 4.1%, job creation most recently has still been at a healthy level. Overall it's a solid picture. The survey data, both household and business, show a significant rise in uncertainty and significant concerns about downside risks. So how do we think about that? That is the question."

Powell also was asked whether President Trump's decision to fire two Democratic members of the Federal Trade Commission raise questions about whether the White House could fire members of the Federal Reserve Board. Powell demurred, saying only that he had answered the question in a prior press conference and that he has "no desire to change that answer." 

8h 21m ago

Powell: 'Base case' tariff inflation will be transitory

Jerome Powell
Federal Reserve Chair Jerome Powell
Bloomberg News
The Federal Reserve expects widespread tariffs to cause a one-time shock to the level of prices rather than sustained inflation, Fed Chair Jerome Powell said.

During his post Federal Open Market Committee press conference, Powell said it was too soon to say anything definitive about the impact of higher import taxes, but for now the Fed is expecting them to be minimal in the long run.

"That's the base case, but we really can't know that … we need to see how things work out," Powell said.

During his remarks, Powell said the FOMC noted higher near-term inflation expectations both from consumer surveys and market activity, such as investment in hedges. But, he added, those same indicators also show that longer term inflation remains modest.

Powell also said that it will be difficult to assess precisely how much of inflation is the result of inflation versus other factors. He said the Fed and other forecasters will be hard at work trying to parse the various elements of price growth in the months ahead.
8h 50m ago

Markets gain on Fed rate news

Last Day Of Trading For 2023 On Floor Of NYSE
Bloomberg News
Stock indices posted modest gains after the Federal Reserve said it would maintain its current interest rate trajectory and slow the pace of its balance sheet runoff, known as quantitative tightening. 

In the minutes after the Fed's announcement, the Dow Jones Industrial Average rose by 0.43%, the Russel 2000 stock index rose by 0.47% and the New York Stock Exchange Composite index rose by 0.2%. The Nasdaq index, which features more tech stocks, rose by 0.75% on the news. 

Bank stocks rallied slightly more than the overall markets, with the KBW Bank index of bank stocks posting a 1.28% gain.
8h 58m ago

Fed officials adjust expectations in light of uncertainty

Federal Reserve Board Chairman Jerome Powell
Federal Reserve Chair Jerome Powell
Bloomberg News
During this week's meeting, the 19 FOMC participants — including seven members of the Board of Governors and 12 reserve bank presidents — also wrote down their updated economic projections for the rest of the year. 

Eleven participants said they expect to cut rates at least two times this year, down from 14 who projected that many during the last quarterly survey in December. Meanwhile, four officials called for no cuts this year, up from one three months ago. 

Committee members also broadly lowered their expectations for economic growth this year, while revising up their predictions for unemployment and inflation. Specific predictions for these economic indicators were varied among the participants, indicating heightened uncertainty about the overall outlook.
9h 7m ago

Fed holds rates steady, prepares to slow QT

powell-jerome-bl-061518.jpg
Federal Reserve Chair Jerome Powell
Bloomberg News
The Federal Reserve held its benchmark interest rate steady on Wednesday and announced its intention to slow the wind down of its balance sheet next month. 

By a vote of 11-1, the Federal Open Market Committee moved to keep the target range for its federal funds rate between 4.25% and 4.5%, and lower the monthly cap on Treasury securities runoff from $25 billion to $5 billion. The central bank will still allow mortgage-backed securities to roll off its books at a rate of up to $35 billion per month.

Fed Gov. Christopher Waller voted against the action, noting that he supported the decision to maintain the policy rate but believes the Fed should continue its current pace of balance sheet reduction. 

The interest rate decision was broadly expected coming into the meeting. The Fed has long maintained that it will taper its balance sheet reduction before ending quantitative tightening, or QT, but gave no signal that such a move was imminent. 

While the federal funds rate impacts short-term borrowing costs throughout the economy, adjustments to the balance sheet are meant to establish longer-term expectations and influence longer-term rates, albeit less directly. 
9h 31m ago

Overwhelming market expectation for no change

Jerome Powell NYSE
Bloomberg News
The Fed's Federal Open Market Committee is unlikely to commit itself to any future moves on Wednesday, likely opting to maintain flexibility in the face of heightened economic uncertainty. Even so, Fed Chair Jerome Powell will likely use the FOMC press conference to lay the groundwork for whatever comes next.

The CME FedWatch tool — which gauges market expectations for FOMC decisions — said there is a 99% probability that the central bank keeps interest rates unchanged during today's meeting.

Rodney Ramcharan, professor of finance and business economics at the USC Marshall School of Business and a former Fed economist, said it will be critical to track how the institution responds to rising political pressure to act.

"I think either this meeting or the next one marks a crossroads in modern history," Ramcharan said. "The inflation target is not met, but all high frequency evidence suggests that the economy is clearly slowing on account of the economic uncertainty generated in the White House. The Fed will be under enormous political pressure to do a preemptive cut either at this meeting or the next.

"In any scenario, the American public is in for a lot of pain, which is only just beginning," Ramcharan said.