Jerome Powell has stabilized interest rates and is investigating tariffs by not raising fees

Certainly, Hawkish Powell used the scary R-word (“salary raise”). It suggests that there is sufficient response to call for “examine” tariff-induced inflation by not increasing interest rates. I sent an oval office in anger.

The rate was stable between 4.25% and 4.5%, but the split of the Federal Open Market Committee (FOMC) has grown, with two members opposing it. This represents the highest level of friction inside FOMC for over 30 years.

But despite the pressure, Powell spoke carefully about cutting, from within the Fed to the outside, regardless of the situation. For a while, analysts set up the pencils at the next FOMC meeting, the September cut.

“While prices on some products are beginning to show higher tariffs more clearly, we have not yet seen the overall impact on economic activity and inflation,” Powell told reporters at a post-member press conference. “A reasonable basic case is that the impact on inflation may be short-lived. It rejects one-time changes in price levels. However, it also has the potential to be more sustained inflationary effects, which is the risk that it will be assessed and managed.”

In terms of one-off price shifts, Powell said the FOMC is keeping an eye on advice to prevent tariff-related inflation from clouding the picture of the economic foundations.

However, investors were using this argument to lobby for the cut, but Powell said the fact that he was. Maintains a stable rate This is evidence of this pragmatism, which says that the FOMC is “examining the inflation of products by not raising interest rates.”

Showing a rise in rates is the exact opposite of what many investors and economists want, but Powell has doubled. Therefore, investors are wondering what FOMC will need to cut.

The Bank of America macroeconomics team said, “Fed Chairman Powell was far more hawkish than we had hoped for at his press conference.” luck. “He was asked a few questions about what the Fed will need to cut in September, and in response, Powell made it clear he is responsible. About data to justify the September cut.”

They added: “To be clear, hiking is still very unlikely, but Powell argued that a “efficient” way to balance risk into a double mission is to put it on hold because it introduces the risk that if it’s too early, it has to raise the fees again.”

The market was meant to agree with Bofa to seize Hawkish Powell. The stock market fell after the announcement while the Treasury Department rose.

UBS’s Paul Donovan said the market may be viewing through FOMC opponents, and may explain this morning’s note. There hasn’t been inflation yet. ”

I’ll keep it in September

Powell’s speech erodes some of his trust in the September cut, but analysts tend to hold on to hope that the cut will arrive at the next meeting in the next month.

The Fed chair gave them reasons to hope, saying, “We are paying attention to the employment risks of our mission.”

“I didn’t think that expectations for this meeting were much better than interest rate cuts, but Powell, showing that he was imminent,” wrote Ellis Ausenbaugh, director of investment strategy at JP MorganWealth Manager.

Similarly, David Merrick, chief US economist at Goldman Sachs, luck: “Neither (Powell’s) statement or press conference provided direct hints on possible cuts in September. In response to questions about the two cut baselines for the dots in June, Powell admitted to supporting it, but said he didn’t want to replace the views of other participants with his own judgment.

That being said, Goldman continues to forecast three cuts in 2025. We will reduce the rate to 3% to 3.25% twice more in September, October, December and 2026.

Mericle added: “Powell’s comments today suggest that the September cuts are certainly controversial, but it is inevitable that the labour market will soften over the next two months and we continue to see multiple paths to reductions.”

Mark Hofele, Chief Investment Director for UBS’s Global Wealth Management, has taken to heart that he agrees to cut interest rates in September. Citing the Employment Openings and Workforce Turning Survey (JOLTS) to reveal both the decline in openings and employment, as well as lower fees.

Conference Committee Consumer Trust Survey Additionally, 18.9% of respondents found it difficult to get a job in July, suggesting that an alarm of weakening the labour market may be starting to chime.

Haefele writes: “The Fed resumes its policy easing in September and continues to hope for a 100 basis points cut over the next 12 months. Investors should consider medium-high grade and investment-grade bonds for more durable portfolio revenue.”