On Wednesday, May 7, 2025 FOMC Chair Jerome Powell gave his scheduled May 2025 FOMC Press Conference. (link of video and related materials)
Below are Jerome Powell’s comments I found most notable – although I don’t necessarily agree with them – in the order they appear in the transcript. These comments are excerpted from the “Transcript of Chair Powell’s Press Conference“ (preliminary)(pdf) of May 7, 2025, with the accompanying “FOMC Statement.”
Excerpts from Chair Powell’s opening comments:
In support of our goals, today the Federal Open Market Committee decided to leave our policy interest rate unchanged. The risks of higher unemployment and higher inflation appear to have risen, and we believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments. I will have more to say about monetary policy after briefly reviewing economic developments.
Following growth of 2.5 percent last year, GDP was reported to have edged down in the first quarter, reflecting swings in net exports that were likely driven by businesses bringing in imports ahead of potential tariffs. This unusual swing complicated GDP measurement last quarter. Private domestic final purchases, or PDFP—which excludes net exports, inventory investment, and government spending—grew at a solid 3 percent rate in the first quarter, the same as last year’s pace. Within PDFP, growth of consumer spending moderated while investment in equipment and intangibles rebounded from weakness in the fourth quarter. Surveys of households and businesses, however, report a sharp decline in sentiment and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns. It remains to be seen how these developments might affect future spending and investment.
also:
Inflation has eased significantly from its highs in mid-2022 but remains somewhat elevated relative to our 2 percent longer-run goal. Total PCE prices rose 2.3 percent over the 12 months ending in March; excluding the volatile food and energy categories, core PCE prices rose 2.6 percent. Near-term measures of inflation expectations have moved up, as reflected in both market- and survey-based measures. Survey respondents, including consumers, businesses, and professional forecasters, point to tariffs as the driving factor. Beyond the next year or so, however, most measures of longer-term expectations remain consistent with our 2 percent inflation goal.
Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. At today’s meeting, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent and to continue reducing the size of our balance sheet.
Excerpts of Jerome Powell’s responses as indicated to various questions:
NICK TIMIRAOS. Nick Timiraos for The Wall Street Journal. Chair Powell, there’s naturally a lot of [inaudible] around 2021 in supply shocks. But there are some who argue that the current situation has notable differences, energy costs are down, housing imbalances look nothing like they did four years ago, labor demand appears to be gradually cooling with wage growth running below four percent. What do you see right now that could nourish higher inflation beyond a rise in goods prices this year?
CHAIR POWELL. I think the underlying inflation picture is good, it’s what you see, which is inflation now running a bit above two percent. And we’ve had basically decent readings in housing services and non-housing services, which is a big part of it. So that part, I think is moving along well. But there’s just so much that we don’t know. I think — and we’re in a good position to wait and see, is the thing, we don’t have to be in a hurry. The economy is — has been resilient and is doing fairly well. Our policy is well positioned, the cost of waiting to see further are fairly low, we think. So that’s what we’re doing. And you know, we’ll see the Administration is entering into negotiations with many countries over tariffs. We’ll know more with each week and month that goes by where — about where tariffs are going to land — you know, land, and we’ll know what the effects will be when we start to see those things. So, we think we’ll be learning. I can’t tell you how long it will take. But for now, it does seem like it’s a fairly clear decision for us to wait and see and watch.
NICK TIMIRAOS. So when you say that you don’t need to be in a hurry, does that mean that — could the outlook change in such a way that a change in your stance could be warranted as soon as your next meeting?
CHAIR POWELL. You know, as I said, we’re — we are comfortable with our policy stance. We think the right — we’re in the right place to wait and see how things evolve. We don’t feel like we need to be in a hurry. We feel like it’s appropriate to be patient. And you know, when things develop — of course we have a record of — we can move quickly when that’s appropriate. But we think right now the appropriate thing to do is to wait and see how things evolve. There’s so much uncertainty. If you talk to businesses, or market participants, or forecasters, everyone is just waiting to see how developments play out, and then we’ll be able to make a better assessment of what the appropriate path for a monetary policy is. So we’re not in that place, and you know, as that develops — and I can’t really give you a timeframe on that.
also:
HOWARD SCHNEIDER. Well, let me press you on this side of the economy being fine right now, because reading the Beige Book very closely the last time around there was a lot of, you know, negative stuff, negative sentiment that was in there. And I know that everybody’s looking at soft data right now. You mentioned it yourself that the sentiment’s sour. But the Beige Book was talking about, you know, the beginnings of layoffs in some industries, prices rising in some places, and an awful lot of investment decisions being pushed to the sideline. Doesn’t that point to a slowdown?
CHAIR POWELL. It may well. It just hasn’t shown up yet. And you know, we all look at all these sentiments and read many, many individual comments just to get a better feel. And you know, businesses and households very broadly are concerned and, you know, postponing economic decisions of various kinds. And yes, if that continues and nothing happens to sort of alleviate those concerns, then you would expect that to begin to show up in economic data. It wouldn’t maybe show up overnight, but it would show up over weeks and months. And that may be what happens, but it hasn’t happened yet. And also, there are things that can happen that will change that narrative. I mean, they haven’t happened, but it’s possible to imagine things. But in the meantime, yes, we’re watching it extremely carefully like everyone is, but don’t see really much evidence of it in the actual economic data yet. And by the way, consumers keep spending, credit card spending. It’s — you know, it’s still a healthy economy, albeit one that is shrouded in some very downbeat sentiment on the part of people and businesses.
also:
COURTENAY BROWN. Thank you, Courtenay Brown from Axios. I guess, you know, we talked about some of the indications of potential layoffs, price hikes, an economic slowdown, all being evident in the soft data. I’m curious why the Fed needs to wait for that to translate into hard data to, you know, make any type of monetary policy decision, especially if the hard data is not as timely or might be warped by tariff-related effects. Are you worried that the soft data might be some sort of false warning?
CHAIR POWELL. No. I mean, it’s — look, the — look at the state of the economies. The labor market is solid, inflation is low. We can afford to be patient as things unfold. There’s no real cost to our waiting at this point. Also, the sense of it is we’re not sure what the right thing will be. You know, there should be some increase in inflation, there should be some increase in unemployment. Those call for different responses. And so until we know — potentially call for different responses. And so you know, until we know more, we have the ability to wait and see. And it seems to be a pretty clear decision. Everyone on the committee supported waiting. And so that’s why we’re waiting.
COURTENAY BROWN. Just a very quick follow-up, there was this sort of vibe session, if you will, where the sentiments expressed in soft data did not translate into the hard economic data. Are you — how are you thinking about that when interpreting some of the signs in the softer survey data?
CHAIR POWELL. You know, I think going back a number of years, the link between sentiment data and consumer spending has been weak. It’s not been a strong link at all. On the other hand, we haven’t had a move of this, you know, speed and size. So it wouldn’t be the case that we’re looking at this and just completely dismissing it. But it’s another reason to wait and see. You’re right that we had a couple of years during the pandemic where people were saying — just very downbeat surveys and going out and spending money. So that can happen and that may happen to some degree here. We just don’t know. This is an outsized change in sentiment, though, and so none of us are looking at this and saying that we’re sure one way or the other. We’re not.
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The Special Note summarizes my overall thoughts about our economic situation
SPX at 5705.05 as this post is written
