Powell Holds His Ground: Subtle Shift on Tariffs, But Policy Patience Prevails
3min read Federal Reserve Chair Jerome Powell spoke again today, reiterating many of the same themes he emphasized during his March 17 post-FOMC press conference. While today's remarks acknowledged that the Trump administration’s tariff regime is shaping up to be more inflationary and disruptive than previously expected, Powell maintained the Federal Reserve’s patient stance. In essence, his message remains: the Fed is still on hold, still data-dependent, and still not ready to commit to a specific policy path—though the ground beneath him is shifting ever so slightly.
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Tariffs: From Transitory to Troubling
Perhaps the most notable evolution in Powell’s rhetoric came in his discussion of tariffs. Back in March, Powell acknowledged that tariffs were a contributor to price pressures, but implied their effects might be fleeting. “A good part of it is coming from tariffs,” he said at the time, but added that tightening policy to counter a transitory shock would be inappropriate.
Today, Powell moved beyond hypotheticals. “It’s becoming clear that tariff increases will be significantly larger than expected,” he said, adding that the same applies to their economic effects. He noted the tariffs are “highly likely to generate a temporary rise in prices,” but also warned that the inflationary impact could be “more persistent.” This shift in language suggests that the Fed is now preparing for a longer tail of elevated inflation stemming directly from trade policy.
Still, Powell tried to thread the needle, reiterating that most long-term inflation expectations remain “well-anchored.” The Fed’s job, he said, is to ensure “a one-time increase in price levels doesn’t become an ongoing inflation problem.” The emphasis on inflation management—rather than accommodation—was subtle but meaningful.
Policy Path: Still No Urgency
Despite mounting concerns about inflation and potential growth headwinds, Powell remains committed to a “wait and see” approach. This stance hasn’t changed since March. Then, he told markets “we’re not in any hurry to move,” and today he reiterated that it’s “too soon to note what will be the appropriate path” for interest rates.
Importantly, Powell repeated that the Fed is “well-positioned to wait for greater clarity before considering policy adjustments.” With Fed fund futures still pricing in five rate cuts this year, the Chair did little to validate that outlook. Instead, he appeared to deliberately hold the center, resisting both the market’s dovish hopes and the inflation hawks’ warnings.
The Economy: Holding Up, For Now
On the state of the economy, Powell’s tone was largely unchanged. Today, as in March, he described the economy as “still growing” and the labor market as being “in balance.” He again pointed to strong hard data—such as the March jobs report—while acknowledging that survey data and sentiment indicators are softening under the weight of policy uncertainty, particularly around trade.
Consumer sentiment, Powell observed, is being influenced by “new federal policies,” especially tariffs. However, he reiterated that incoming data “still shows a solid economy.” That’s the same assessment he gave three weeks ago, though he now appears more sensitive to potential drag from business investment hesitancy. “Businesses are waiting for clarity to make decisions,” he said today.
Jobs: Stable, But Not a Trigger for Action
Powell continued to express confidence in the labor market, describing it as near “maximum employment” with no signs that wage growth is feeding into a wage-price spiral. This is consistent with his March view that the job market was not a current source of inflation and was characterized by “low firing, low hiring” conditions that imply balance rather than overheating.
Risks & Recession: Probability Rising, But Not Inevitable
Both in March and today, Powell highlighted elevated downside risks. On March 17, he noted that “the probability [of recession] has moved up” and emphasized that the outlook is “highly uncertain.” Today, he acknowledged outside forecasts pointing to higher recession odds but reiterated that the Fed does not publish its own probability.
He again downplayed the idea that market volatility should dictate policy, emphasizing that the Fed responds to “persistent changes in financial conditions”—not daily headlines.
Conclusion: Still Playing for Time
If markets were hoping for a dovish pivot, Powell did not deliver. What he did offer was continuity—and that, in itself, sends a message. The Fed is not moving until the picture becomes clearer. Even with tariffs rising and economic risks accumulating, Powell’s tone today was that of a Chair determined to avoid an unforced error.
Yes, the inflation story is getting more complicated, and yes, tariffs are now a larger and more persistent headwind than the Fed initially expected. But Powell is not ready to declare that either inflation or growth has moved far enough off course to warrant action. Patience remains the policy—and for now, that’s the point.
