(Reuters) -The U.S. central bank will be in no rush to cut interest rates while it waits for more clarity on how the policies of the new Trump administration affect the economy, Federal Reserve Chair Jerome Powell said at an economic forum in New York City on Friday.
Powell spoke at a volatile time, with stock markets and bond yields both declining in the wake of President Donald Trump’s whipsaw announcements of steep import tariffs on major trading partners Mexico and Canada, followed by delays in implementing them. Trump has also doubled tariffs on imports from China.
MARKET REACTION:
STOCKS: The S&P 500 pared a loss and was off 0.06%
BONDS: US Treasury 10-year yield reversed 1.3 bp higher on the day to 4.295%
FOREX: The dollar index ticked up but was still off 0.25% from late Thursday
COMMENTS:
LINDSEY BELL, CHIEF MARKET STRATEGIST, CLEARNOMICS, NEW YORK
“Powell is giving a sense of calm to a market that’s been moving very erratically. He said the economy is in a good place and inflation is still anchored despite some of the survey data.”
“What Powell is doing today is giving the market a sense of direction. It’s a market that has lacked significant direction because of the back and forth on tariffs, the see-sawing, from the Trump administration.”
“The fact that he’s calm and composed is a lot better than the hardline tone we’re getting from the Trump administration around tariffs, around DOGE (Department of Government Efficiency) and government spending.”
“Investors are grasping for something that gives them a better understanding of what’s going on. He’s painting a very clear picture. This tariff uncertainty is real … The market can react sharply to the news, but the economic outcome can be much less significant.”
“Fewer rate cuts is less of a concern to the markets right now than the economic impact tariffs could potentially impose on the economy. Because of Powell’s assessment of the economy in a good place. Investors are finding solace in that.”
TONY ROTH, CIO, WILMINGTON TRUST INVESTMENT ADVISORS
“The Fed is going to be very conservative on what they say until we know whether or not the tariffs are tactical or strategic, and if they do turn out to be strategic, they’re still going to wait until the hard data demonstrates both that inflation is low, and the economy is in recession before they really do very much. Those are the two gates that you’d have to get through for them to do anything, but the likelihood of getting through those two gates is mounting quickly. If tariffs are strategic, I would say we probably go into a recession in the next three months.”
