Fed’s Patient Pause

Fed Chair Powell reiterated in his congressional testimony that the FOMC is in a wait-and-see mode as it expects higher tariff-induced inflation over the summer.

Daily Updates:

• During his testimony to congress at Capitol Hill yesterday, Federal Reserve Chair Powell repeated some of the points made in his FOMC presser last week: that the central bank still needs time to assess whether tariffs will drive inflation higher; and, for that reason, the Fed is on wait-and-see.

• On multiple occasions, Powell stressed that the FOMC expects higher inflation:

“If you just look in the rearview mirror and just look at the existing data that we’ve seen, you can make a good argument that that would call for us to be at a neutral level, which would be a couple of cuts, maybe more kind of thing. The reason we’re not is the forecast by all professional forecasters that I know on the outside and the Fed do expect a meaningful increase in inflation over the course of this year”.