On Wednesday (December 18th, Eastern Time), Federal Reserve Chairman Powell said at a press conference after the interest rate meeting that the Federal Reserve is at or close to slowing down interest rate cuts, and will make a decision on interest rate cuts based on data next year, and it seems unlikely that it will raise interest rates.
The Federal Reserve announced a 25 basis point rate cut on Wednesday, in line with market expectations, and the target range of the federal funds rate was lowered to 4.25%-4.5%. This is the third consecutive rate cut by the Fed, after cutting rates by 50 basis points and 25 basis points in September and November respectively.
The latest interest rate dot plot shows that policymakers expect two rate cuts in 2025, while the forecast for rate cuts next year reached four times in September.
Although the rate cut was ultimately made in December, Powell claimed it was a difficult but correct decision.
He noted that the Fed is trying to find a balance between the two risks of moving too slowly, which could unnecessarily weaken economic activity in the labor market, and moving too quickly, which could undermine the Fed’s progress in controlling inflation.
On future monetary policy actions
Powell said that after this rate cut, the Fed has lowered the policy rate by a full 100 basis points from its peak, and now the monetary policy stance is significantly less restrictive than before, so policymakers can be more cautious when considering more interest rate adjustments.
Regarding future monetary policy actions, Powell said that any rate cut decision by the Fed in 2025 will be based on upcoming data rather than current economic conditions.
He said that as the Fed is working to keep inflation down to 2% while maintaining a strong labor market, a rate hike next year seems unlikely.
Affirming the performance of the U.S. economy
Powell affirmed the performance of the U.S. economy, using terms such as solid, strong and resilient many times.
He said that the overall economic performance is strong; economic growth in the second half of 2024 is faster than expected; there is no reason to think that the possibility of economic downturn is higher than usual; it is clear that the United States has avoided a recession; and he is very optimistic about the economy.
Powell said that policymakers generally expect GDP growth to remain strong.
Talking about inflation and the job market
The Fed said it will continue to watch progress in improving inflation in 2025, given that year-on-year inflation data remains sticky.
“We will watch for improvements in inflation when considering further rate cuts,” Powell said. “We have made little noticeable progress in 12-month inflation data.”
Powell believes that consumers are feeling more of the impact of high prices rather than the direct effects of high inflation.
“We know very well that prices have risen a lot, and people are really feeling it, including food, transportation and heating bills. This global outbreak of inflation has brought great pain,” he said. “Even though inflation levels have fallen sharply at present, people are still feeling the pressure of high prices, and this is what consumers feel most intuitively.”
He added that the best solution to this is for the Fed to continue working to get inflation down to its target so that wages can keep up with inflation and ultimately restore consumers’ good feelings about the economy.
Powell said policymakers are closely watching the dynamics of the labor market.
“From a number of indicators, we do think that the labor market is cooling, but the cooling is not fast and it does not cause real concerns,” he said.
Some officials have begun to assess the potential impact of Trump’s policies
US President-elect Trump has threatened to implement a radical tariff plan after taking office, and economists generally believe that this may lead to another rise in US inflation.
Powell revealed that some members of the Federal Open Market Committee (FOMC) have begun to make preliminary assessments of the possible impact of Trump’s policies.
He also specifically mentioned Trump’s tariff plan, saying it is too early to draw conclusions on how it will affect inflation.
Powell said the Fed has no intention of holding Bitcoin
Trump previously promised that he would implement policies that are favorable to the cryptocurrency industry after taking office and consider establishing a strategic reserve of Bitcoin.
Powell said the Fed does not intend to add Bitcoin to its balance sheet.
“We can’t hold Bitcoin. The Federal Reserve Act stipulates what we can have, and we have no intention of seeking to amend the law. This is something for Congress to consider, but we are not seeking changes at the Fed,” Powell said.
