Fed Chair Powell Confirms Rate Hikes Are Off the Table

• Powell said no one expects further hikes, as the Fed voted 10–2 to hold rates and views policy as sufficiently restrictive.

• Inflation pressure is mostly tariff-driven, with core PCE near 2%, giving the Fed room to ease once tariffs peak by mid-2026.

• Growth remains solid and jobs are stabilizing, while Powell warned deficits are unsustainable and reaffirmed Fed independence.

Federal Reserve Chair Jerome Powell on Wednesday ruled out further rate hikes after the latest FOMC meeting in Washington. The committee voted 10–2 to hold rates at 3.50%–3.75%, with no members supporting an increase. Powell said a hike is “not anyone’s base case,” confirming tightening has ended and policy is now restrictive enough.

Rates, Inflation and the Shift in Policy Direction

During the press conference, Powell said inflation remains elevated, however most excess pressure stems from tariffs rather than demand. He noted core PCE inflation, excluding tariff effects, runs only slightly above 2%. Powell added tariff-driven inflation should peak by mid-2026, then ease later this year.

As a result, the Fed sees room to loosen policy once tariff effects fade. However, Powell stressed decisions will occur meeting by meeting. He said no decisions have been made on timing or size of future cuts. Still, officials are no longer discussing hikes as a realistic option.

Powell also said financial conditions are no longer tightening. He described policy as loosely neutral or somewhat restrictive after three rate cuts last year. According to Polymarket data, traders expect rates to remain unchanged until the June FOMC meeting.

Labor Market, Growth and Fiscal Concerns

Turning to the economy, Powell said growth continues to surprise with its strength. He noted unemployment shows signs of stabilization after gradual softening. The jobless rate stood at 4.4% in December, with little recent change.

However, Powell said job gains remain low, with payrolls declining by an average 22,000 monthly recently. He stated a weaker labor market would warrant cuts, while strength supports holding rates steady.

Powell also addressed fiscal policy, calling the U.S. budget deficit unsustainable. He said the sooner it is addressed, the better. Gold prices rose following those remarks, though Powell urged caution in reading market signals.

Independence, Tariffs and the Path Ahead

Powell reaffirmed the Fed’s independence, saying it has not been lost and will not be compromised. He said policy decisions remain objective and nonpolitical. He declined to comment on the dollar, noting limited evidence of aggressive foreign hedging.

On tariffs, Powell said they likely cause a one-time price increase. He added most inflation overruns stem from tariffs, not demand. Powell also said shutdown effects should reverse this quarter, describing them as temporary. Powell’s term as Fed chair ends in May, ahead of the June meeting.