FOMC Statement and Chairman Powell’s Press Conference – Currency Thoughts
FOMC Statement and Chairman Powell’s Press Conference
May 7, 2025
Federal Reserve policy held steady at the third scheduled FOMC review of 2025. The decision to stay put was very widely anticipated and approved by all voting members of the FOMC today. A released statement reaffirms that the recent pace of economic activity in the United States and and current labor market conditions have stayed solid. “Inflation remains somewhat solid,” and the distortion of swings in net export on U.S. data are acknowledged. Macroeconomic forecasts will not be revised until the next scheduled meeting in September, but the statement’s text includes no modifications to suggest a change from the signal at the March meeting that only two rate cuts in 2025 seem likely. At that time, to be sure, there were differences among FOMC members regarding how many cuts to expect, but the clear message on timing was that a rate change before the July meeting is remote and that an initial change being delayed into the fourth quarter is even possible.
The markets initial reaction to the FOMC statement and before the Powell press conference had begun was a rise in U.S. share prices and a fall in the dollar against the euro and in the 10-year Treasury yield.
As generally expected, Chairman Powell’s press conference closed no doors on future options. As I expected, the mantra that both the current policy stance and general behavior of the economy being in a good place was repeated, and that leads to the inference that there is no urgency to change policy now especially considering the lack of clarity over exactly what policy changes will occur, when they will be done, and the ensuing reaction of inflation and economic activity to those changes. That’s what data-dependency means. Policy will take its cue from actual and expected economic conditions and from the reaction of financial markets to what is happening.
There exists a possibility that the Fed’s mandates will move in directions pointing to conflicting monetary policy solutions. The decision over which mandate to prioritize will hinge on whether inflation or economic activity is most apart from the desired level and also a judgement about how long it might take each to return to desired levels.
On the final question of the press conference, Powell revealed that he had not yet met with President Trump because Trump had not requested a meeting, and that, as always before, the initiative for such talks comes and rightfully so from the White House, not the Federal Reserve.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
ShareThisYou can leave a response, or trackback from your own site.
Leave a Reply
You must be logged in to post a comment.
