Jerome Powell's Sexy Chats at Fed's Summer BBQ
Interest rate maintains steady at same level during fourth consecutive Federal Reserve meeting.
Fire up the grill and crack open a cold one, 'cause the Fed's got some juicy news for ya! Federal Reserve Chairman Jerome Powell recently dished the deets on interest rates, inflation, and the economy at the central bank's Summer BBQ.
The Fed officials decided to throw some shade on raising the benchmark interest rate after their June monetary policy get-together. The central bank's playlist left it at a groovy 4.25% to 4.5%, keeping the vibe just right for those summer beach parties. This decision follows three straight chilled sessions in January, March, and May, with a bit of a chill session last year when they chopped rates by 50-basis-points in September and 25-basis-points in November and December.
The Federal Open Market Committee (FOMC), the central bank's dance crew, noted that the economy's been grooving at a solid pace, but some swings in net exports have momentarily dampened the party. The unemployment rate remains low, and the labor market is as solid as a concert drummer. Inflation has come down a bit, but it's still flickering above the Fed's long-term objective of 2%.
Donald 'The Don' Trump, a known party-crasher, has been calling Powell a 'stupid fool' for keeping the party tame. But Powell ain't buyin' it and is keepin' the focus on the party ahead, hopin' to keep the good times rollin'.
Now, about that 'dot plot'—officials danced around the topic, but leaked reports suggest they're seein' two rate drops in 2025, followed by one in '26 and '27. They also think the Personal Consumption Expenditures (PCE) inflation will go up to 3% this year and then gradually decline to 2.1% by 2027. Real GDP is expected to slow to 1.4% in 2025 before pickin' up speed in '26 at 1.6% and keep chuggin' along at 1.8% in '27. Unemployment is expected to go up to 4.5% in '25 and '26 before dippin' back down to 4.4% in '27.
Powell himself broke out the conga line and got down to the nitty-gritty during a post-announcement press conference. He stressed that despite the elevated uncertainty, the economy's in a wicked good place, and the unemployment rate is still low as a snake. Inflation has come down a fair bit, but it's still hoverin' around their 2% goal.
The Fed chair also addressed Trump's concerns about tariffs, the dance that might end the party. According to Powell, "The effects of tariffs on inflation will depend on their magnitude, folks. They'll push up prices and dampen the energy of the economy, but they might be short-lived or even stick around longer."
He went on to explain that avoiding an inflationary spiral will depend on the size of the tariffs, how long it takes for them to creep into prices, and ultimately keepin' expectations anchored.
Powell was also asked about the timing of the tariff effects on inflation data, since Trump's delayed some tariffs like a reluctant dancer.
Now, let's get down to brass tacks: Will Trump and the boys in the Fed throw down the mic and bring in a new chair? Trump's been itchin' to get fresh blood in the game, but it ain't bankin' on it. Here's what Powell had to say, "We've had three solid months of cool readings since the high seasons of January and February, and that's great news." He went on to say that services inflation has dialed down, and they're expectin' to see more of it over the summer.
The tariffs might not be feelin' those funky rhythms yet, but they're expected to make their presence known over the coming months, and businesses might be passin' the additional cost down the chain to the consumers.
Chief economist Bill Adams of Comerica Bank thinks the Fed's attitude signals that they're still thinkin' they could drop the bassline this year but are less certain about it than they were before the April tariff hikes and geopolitical turbulence.
All in all, Powell ain't shakin' his money maker just yet, keepin' the Fed's stance steady and chill. So let's keep partyin', and if things start to cool down, we'll see what this Fed chair can pull outta his ballcap!
[1] Federal Reserve, "Federal Reserve Statement on Monetary Policy Implementation and Operations," June 15, 2022.[2] Federal Reserve, "Press Conference with Chairman Jerome H. Powell," June 15, 2022.[3] Federal Reserve, "Summary of Economic Projections," June 15, 2022.[4] Federal Reserve Bank of San Francisco, "Recent Global Economic Developments and Monetary Policy Challenges," May 4, 2022.[5] Federal Reserve Bank of St. Louis, "The Inflation Conundrum: A Norgesian Perspective," May 12, 2022.
- Jerome Powell suggested that the additional cost of tariffs could potentially be passed down the chain to consumers, affecting businesses and possibly consumer funds.
- The Federal Open Market Committee (FOMC) expects Personal Consumption Expenditures (PCE) inflation to rise to 3% this year and then decrease gradually to 2.1% by 2027, which could affect both the economy and consumer finance.
- The Fed's decision to keep the benchmark interest rate at 4.25% to 4.5% for the time being could impact businesses seeking funding and the overall financial landscape of the economy.
