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Economic Indicators Show Resilience but Uncertainty Persists
While acknowledging heightened uncertainty, Powell maintained that the U.S. economy remains in a “good place” with a strong labor market and inflation gradually returning to the Fed’s 2% target. February’s nonfarm payrolls report showed a gain of 151,000 jobs, slightly below expectations but consistent with a solid average of 191,000 new jobs per month since September. Wage growth also remained steady, with average hourly earnings rising 0.3% in February and 4% year-over-year.
However, Powell noted that consumer spending could be slowing, and business sentiment remains cautious due to ongoing trade tensions. Tariff disputes with Mexico, Canada, and China have introduced further uncertainty, complicating the Fed’s policy outlook. Despite some short-term inflation measures edging higher, Powell reiterated that long-term inflation expectations remain anchored.
Rate Cuts Unlikely in the Near Term
With the Fed’s next policy meeting scheduled for March 18-19, expectations for immediate rate cuts appear premature. Policymakers are set to release updated economic projections that will reflect the early impact of Trump’s policy decisions. While investors are pricing in multiple rate reductions this year, Powell’s remarks suggest the Fed will resist reacting to market pressure unless economic conditions deteriorate.
For now, traders should expect the Fed to hold rates steady in the 4.25%-4.50% range. The central bank’s cautious approach indicates that any policy easing will depend on clear economic signals rather than market speculation.
More Information in our Economic Calendar.
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