Powell Speech Today: Fed Focused on ‘Separating Signal’

On Friday, Jerome Powell, the Chair of the Federal Reserve, stated that the U.S. economy is still doing well. However, policymakers are maintaining their position as they await more clarity on how the many policy changes implemented during the Trump administration have affected the economy.

Powell acknowledged that he and other Fed officials are closely observing the impacts of the Trump administration’s policy changes on trade, immigration, fiscal policy, and regulation. He made this acknowledgment in prepared remarks for the 2025 U.S. Monetary Policy Forum in New York City.

The White House has advanced specific policies, like imposing higher tariffs on Chinese goods, but has reversed course on others, including those affecting Mexico and Canada. Powell speech today stated that the uncertainty regarding such changes and their probable economic consequences remains “high.” For this reason, he thinks that the Fed should not act quickly to change its policy in response.

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Powell stated in his speech today, “What matters for the economy and the direction of monetary policy is the overall impact of these policy changes. ” As the outlook changes, we are concentrating on distinguishing the signal from the noise as we analyze the incoming data. We are in a good position to wait for more clarity and do not need to be in a rush.

Monetary policy is not on a “preset course,” Powell continued. He believes the Fed can maintain stable interest rates if the economy continues growing and inflation doesn’t rise steadily toward 2%. Powell speech today stated that the Fed can readily reduce rates in response to a worsening labor market or a faster-than-expected cooling of inflation. “We are in a good position to handle the risks and uncertainties that come with pursuing both sides of our dual mandate with our current policy stance.”

Powell mostly dismissed the most recent indications of improving labor conditions, even if the 151,000 jobs created in February was less employment growth than analysts expected. Powell speech today stated that companies had added a healthy monthly average of 191,000 jobs since September, indicating that “many indicators show that the labor market is solid and broadly in balance.”

Although salaries are exceeding inflation, they are doing so more sustainably than earlier in the economic recovery, and the unemployment rate is still low at 4.1%. He continued, “The labor market is not a significant source of inflationary pressure because wage growth is slowing and labor supply and demand have better balanced.”

Powell also repeated that he is not overreacting to a few higher prints, even though the Fed is still committed to returning inflation to its 2% target.

Powell, in his speech today, stated, “We expect that the path to sustainably returning inflation to our target will continue to be bumpy.” He added, “We avoid reacting negatively to one or two readings that are higher or lower than expected because inflation can fluctuate from month to month.”

Powell said he expects inflation in non-housing and housing services to improve in the upcoming months.

Powell also mentioned that officials started their second five-year inspection of the monetary policy framework at the January Federal Open Market Committee meeting. Although policymakers would consider the consensus statement, which includes the declaration on longer-run aims and monetary policy approach and central bank communications, he reaffirmed that the 2% inflation target will remain in place and not be the review’s focus.

Powell expects the review to be completed by late summer. “We will take into account the lessons learned over the last five years and adjust our approach, where appropriate, to best serve the American people, to whom we are accountable,” Powell said.

Powell speech today represents his last chance to provide the public some background on how policymakers are considering the changing economic environment, which includes significant revisions to trade policy, ongoing inflation, and declining consumer morale. The central bank’s blackout period begins on Saturday, and the Federal Open Market Committee is scheduled to meet from March 18 to 19.

According to CME’s FedWatch tool, traders presently believe there is a 97% chance that the central bank will maintain the fed-funds rate at its current level at the end of the March policy meeting.

The annual conference, hosted by the Booth School of Business at the University of Chicago, brings together top economists, market experts, and policymakers to discuss U.S. monetary policy. A panel of academics created the new study, “Monetary Policy Transmission to Real Activity,” which is the main topic of discussion at this year’s gathering.

Before Chair Powell’s keynote address, New York Fed President John Williams and Governor Michelle Bowman participated in talks on the most recent research. In the afternoon, a panel discussion on central bank framework reviews will be led by Loretta Mester, the former president of the Cleveland Fed.