Power Lunch - Fed holds rates steady, notes rising uncertainty and stagflation risk 5/7/25

Episode Date: May 7, 2025

The Federal Reserve on Wednesday held its key interest rate unchanged as it waits for the Trump administration’s trade policy to take shape and sees its impact on a sputtering economy. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm Kelly Evans, joined by Brian Sullivan, and we are just about four minutes away from the Fed's decision on interest rates today. No change in rates is expected, but it'll be very interesting to see what Chair Powell and the committee say about the current economy. Before we get to our panel, let's get a quick status check on the markets. Dows off the highs from an hour or so ago, but it's up half a percent today. SMP's up two points, so just about unchanged. The NASDAQ is down four-tenths of a percent as Alphabet is a big decliner today. It's having its worst day in a year. and a half after an Apple executive said in browser searches fell in April for the first time. This was part of their antitrust trial. It's taking Alphabet shares down nearly 8%. Apple's down a little bit less than 2%. So those are some big comments roiling the tech world today. Let's get right to our all-star panel as we're moments away from hearing from the Fed. David Kelly of JPMorgan Asset Management is with us. Stephanie Roth of Wolf Research and Jim Karen of Morgan Stanley Investment Management. David, first to you and I failed to ask, not to get super wonky right off the bat here, but the balance sheet, right? I mean, we should,

that could be in play amongst many other things this afternoon. Well, yeah, I mean, they're bringing down the balance sheet very slowly, but I think the most important issue that the Chair Powell's going to have to get across here is he does not want to make a move on rates until he has got clarity on tariff policy and tax policy. There's a certain moral hazard involved if you cut rates and give an insurance policy to the other side of Washington. and I think he wants to avoid doing that. So he's going to try and find reasons to stall making any decision at all here.

Stephanie, what do you expect? Yeah, I think that's right. He's not going to be able to preempt any sort of cuts, especially because the data that we've gotten recently have been pretty solid. So it certainly doesn't give them any sort of room to allude to that. We're going to be looking for indications about how are they thinking about if we have a slowing labor market but not a rise in the unemployment rate? What do they do from there?

That's a really challenging backdrop for the Fed. in an environment that's really quite uncertain. Jim, we just heard Greg Ip sort of saying, and when he read Powell's comments in his speech a few weeks ago, he sees him as almost airing on the inflation side of the mandate when push comes to shove. And the market is more or less embracing, I think you could say, for a hawkish hold today.

How are you, what are you expecting? And do you think that's correct? Yeah, look, I would disagree a little bit with Greg Epp on this. I think that he would be more airing on the side of the unemployment rate. I think the unemployment rate is going to give the Fed more more high-level information in terms of what they want to do. I think inflation is staying stubbornly high, so I don't think the Fed is in a position right now to really try to counter that at this current juncture, but they will react to the unemployment rate. Look, there's one piece of good news here.

The Fed does not have a dot plot at this meeting. They do not have to go on record and make a forecast. So I think that gives them some breathing room to at least start to think about, you know, how they may backpedal a little bit here. I don't think they're going to move today. It doesn't look like June would be on the table at this point either. And I think the Fed's going to try to make it clear that they're just going to still wait and see how both, as David Kelly pointed out, both tax and tariff policies play out.

Brian, jump in here. Yeah, hey guys, from out west of the Milken Global Conference. Good to see everybody. Listen, and maybe I'll take a different tact, but everybody I'm talking to here the last couple of days, a lot of heavy hitters, the bond market, finance, etc. They're talking less about sort of the things that we're talking about unemployment rate inflation.

They're talking more about J-Pathes. Powell, what does this say about Jay Powell, the human being? Does he react to the seeming political pressure of Trump? Powell, as a person, is also, I think, greatly in focus today. I think that's a great point. And of course, we can't pretend like the Fed's making this decision, you know, in a vacuum. They're making it up against some serious pressure from the president. So how that factors into things that we're about to find out.

Let's get to Steve Leesman for the Fed's decision on interest rates. The Federal Reserve keeping interest rates unsubeselytes. changed at four and a quarter to four and a half percent. But seeing a higher chance of stagflation, they didn't use that word, but here's the language they did use. They said the risk of higher inflation and higher unemployment have risen. Both of those together in the same sense. They went on to say a further increase in uncertainty is a further increase in uncertainty around the outlook, adding that word further to the prior statement. Also noting that swings in exports have affected the data. That's why we got to

that big negative GDP number, and they took note of that for the first quarter. But saying economic activities still continued at a solid place, the unemployment rate is stabilized at a low level, and that inflation remains somewhat elevated. So all of that basically in line with our understanding of the hard data. They say they are watching risks on both sides of the mandate. The decision was indeed unanimous. Quantitative timing will continue, and the committee is prepared to adjust monetary policy as appropriate, which is data, which is a language that they used in other times.

Guys, this notion of the risk of both higher inflation and higher unemployment have risen, it really underscores that idea of there being risk to both sides of the mandate and the Fed, apparently being no closer to figure out which one needs more careful attention from the Fed yet. Kelly? Steve, thank you very much. Steve Leesman is at the Fed. Stick around, though. Let's get some reaction from our panel.

And I'll kind of go in reverse order from what we just heard. Jim, hear you hear you hear at the stagflation. Yeah, so the unemployment rate came up, right? So I think this is something that is somewhat, I wouldn't say new. Inflation is not new. Inflation, we know, has been stubbornly high. But now that the Fed is starting to really comment on the unemployment rate, this is really the key. So look, everybody looks for the quote-unquote Fed put in the markets.

I think the Fed put is probably struck around a 4.5% unemployment rate, or at least a movement towards that level. So unless we get a significant deterioration in the labor market, then it's hard to have a deterioration in the overall broader economy because, you know, consumption is 70% of GDP and that comes from labor. People have wages to spend. So ultimately what I think is happening here is that the Fed is really waiting to see if corporations in these earnings calls are going to start to now lay off workers as a result of this. If they don't see that and the labor market stay relatively resistant, that we may be kicking down, kicking the can down the road on rate cuts for a while longer, but we have to wait and see. And that's the point. Yeah, the market's initial read here is kind of similar to what we saw going into. We're not seeing any big dislocations right now, but it's early. Stephanie, what's your take? Yeah, I think this is an important change in the sense that it tells us they are concerned about inflation being persistent. So, you know, a couple of weeks ago when

when Chair Powell noted that inflation might be transitory at this time, they are certainly walking that back and more, which tells us that the Fed might be a little bit more hawkish than would otherwise be the case. They are certainly going to be in no rush to cut. They're not going to do preemptive cuts, that's for sure. They're going to have to wait to see real economic weakness, which is the unemployment rate rising, say, towards that four and a half percent or higher. Yeah, there's the 10-year Treasury, about 4-275. So dipping a hair. David, what are you looking at? Well, I think it's very, very interesting. I mean, the first thing is, I think it tells us a little bit about what sort of message Jay Powell is willing to put out there.

I mean, he does seem to have a certain tunnel vision. He's trying to ignore what's coming in from the other side of Washington. Because frankly, you know, I think it's sending a shot across the bow of the administration saying, essentially, if you read between the lines, your policies are leading to higher inflation and higher unemployment. Now, having said that, I do think that, you know, the language on higher inflation kind of makes sense because the April 2nd tariff announcers, which are much higher than people expected, There were since the last meeting, so yes, that part of inflation has gone up. The one thing I caution on is unemployment.

We've got such a reduction going on in immigration, we think, that it may dampen down any increase in the unemployment rate. So I tend to agree with it. This is a somewhat hawkish statement, and it says we're not going to be in any hurry to cut rates because, honestly, there are risks to both sides of our mandate here, and we're not sure which way we should be playing this. Brian? Yeah, I guess I'd go to Steve Leesman on this because it is a little bit vexing.

Yesterday, obviously, Kelly, you had David Zervos on with Power Lunch, talking about a half a percent, you know, whatever, 50 basis point rate cut. You know, Steve, tomorrow we're going to be at the Port of Long Beach, kind of looking at incoming traffic from China, exports, imports. You've done amazing research and reporting on how much all this tariff stuff may impact GDP and the U.S. economy. And yet the Fed today, I don't want to say is ignoring that. But with no rate cut, do we read into this that Jay Powell and his team,

maybe think the U.S. economy is holding up better than some thought, at least for now? I'm just wondering, Brian, when you go to the port of Los Angeles, Long Beach, will there be anything to see there? What are you going to film? Apparently, there's no, all the ships are coming in empty. And I say that is not even a funny thing in the sense that that's a big part of the outlook. I want to just address real quickly what David Kelly was saying. David, the Fed is not saying anything here that we haven't picked up in our Cs. the NBC Fed survey that other people who have done surveys of the outlook of forecasters are picking up, which is that indeed, the risk of higher unemployment and higher inflation are both the case right now.

We have had in our last survey, our Fed survey we did on Tuesday, both of those went up and went up meaningfully to four, six on the unemployment. And it really gets back to the conversation that Jim was sort of having with himself, which is the one that I think, every investor is having with himself, which is given those two facts, which is the one the Fed is most likely to address? Now, you can make a bet that it's going to be on the unemployment side. I don't think, Brian, that the Fed is ignoring anything here. I think they see palpable risks to both sides of their mandate. You're going to have an increased tariff on every imported product in this country. By the way, that's not something other countries will be facing.

And you're going to likely have increased unemployment because a lot of the people, Brian, involved in the jobs that you're going to look at tomorrow, their jobs are in jeopardy in part because of what's happening at the Port of Long Beach. They are. And Stephanie, I think the criticism would be this, okay? And I'm speaking for many of the women and men that I've been talking to here the last few days, that we cut rates last year by 75 basis points in the fall because of a small downtick in the U.S. economy. Here we have this. existential threat of tariffs, which pretty much every economist that does not work for the Trump administration has said, to Steve's point, will be a net negative, a drag on the economy,

and yet we're not cutting rates. I think I would speak for many people here and say it's very hard to square this idea that we were cutting rates last year. We've got a bigger economic threat this year, and we have a Fed that's on hold. You know the criticism is going to be out there. Well, a key thing to ask is, do we know for sure these policies are going to remain in place? We're now, we've already changed the tariff rates after April 2nd. We're not potentially going to take tariff rates down with China. Could you imagine a scenario if the Fed preemptively cut rates and then Trump took down the tariffs? Like that's something that they certainly cannot do that would risk inflation expectations

and would undermine their credibility. So they need to watch the facts as they come and then react to the economic data. They cannot preempt this, even though, sure, this could risk. a real downturn in the economy, but they have to address it when it comes, not in response to policy, which happens to be quite uncertain and volatile. Brian, I think the comparison to last year is way off base. I'm not saying you're making it, but the scenarios couldn't be more different. I mean, you have a situation where you're going to be raising prices on virtually all imports. That was not the case back in the summer

when the Fed cut 50 before the election and 50 after the election. You had some danger. You also had the Fed for sure was way tighter at 530. It's come down about 100 basis points since then. So I just think the comparison with last year and this year is something that may be best left for the political realm, but not necessarily for the economic one. That's a fair point, David Kelly. I mean, listen, we had Zervos yesterday.

Everybody has their own predictions, okay? Nobody. Fed decided that the best course of action was to do nothing. What do you think the Federal Reserve would have to see in the next few months to make a change either way? And let me just throw this fireball in there because why not? Is there any chance the Federal Reserve raises rates? Yeah, I don't think they're going to raise rates. I mean, people talk about stagflation all the time, but the truth is it's almost always flation stag. You get the inflation first and then you get the stagg.

nation and they've got to be forward looking here. But what Jay Powell said two days after the election is we don't guess, we don't assume, and we don't speculate. And they want to see policy from the other side of Washington locked in before they react to it. They realize they're going to have to react to it, but they're not going to preemptively react to it because they don't want to encourage higher tariffs. I mean, the big difference I would say from last year is that they're not fighting some outside

force. These are policy decisions being made directly today in Washington. And we need to, you know, we need to try to get tariff levels certain, and I would argue down, being an economist, I don't like tariffs. But we need that clarity. We also need clarity in the budget. I think this is the other thing that they're probably worried about. They're not talking about. But are we going to get a lot of fiscal stimulus baked into that tax bill that is wending its way to the president's desk?

If that happens, they don't want to be putting monetary stimulus in the economy where we're going to get a big dose of fiscal stimulus on higher deficits next year. So they really have to let the other side of Washington figure out what it's doing. doing. And I just want to point out, and Brian, I'll just make this comment to you out in Los Angeles, we are seeing markets come off their highs and almost turning negative. Well, the NASDAQ was already negative. The Dow's in danger of doing so. We're getting the Fed decision, but we're also getting a couple of headlines from the president who seems to indicate, as you can see on the screen there, he's not open to pulling back on the China tariffs. So that would be one reason to keep an eye on throughout this half hour, throughout this whole hour, throughout the whole afternoon, if we see

some pressure on the markets. Which is all very bizarre, given that Treasury Secretary Scott Bessett, who is here yesterday, is headed to Switzerland this weekend. They're going to have negotiations and talks with China ostensibly about the tariffs. So I would wonder, I guess I should just ask somebody that's here, or we can ask our panel, why is Bessett going to Switzerland if the president says he's not open to pulling back on the tariffs, you want to be in a position where, I guess, China sees a window of hope, you know, where maybe that if we do this, the U.S. will do that, and we dial back a little bit on it. It is an interesting headline. And as you point, Kelly, one that is clearly impacting

the market. It's not a lot, but it is impacting the markets. Yeah, so we'll have to throw that all into the stew here. A panel will let you go. We appreciate it today. Thanks, thanks as always, for joining us. Bob Bassani's down at the New York Stock Exchange for his swan song, Fed reaction here, Bob. And now we can throw some of these headlines into the mix. Yeah, and the initial reaction was really rather muted. And then we got the China headline. So that really, I think, changed things a little bit. We were basically flat and then went a little bit negative. This statement is an exercise in preparing for several outcomes. I agree with Steve. It sort of sounds stagnationary, but he's looking on both sides of this thing.

When I taught the people the last two days, most people down here are more worried about growth than inflation. They're worried about drying up the tourist business or inventory drawdowns. The problem is the hard data doesn't really support it yet, and that's really the issue. I know a lot of people out there want the Fed to move, and we expect the economy to move as fast as we've seen the stock market move in April. But everybody knows that doesn't happen. The real economy doesn't move that quickly, and that's part of the problem. We just don't have the data yet. So a lot of people down here are dovesh. They want the Fed to be preemptive. They want the Fed to do something. The data is not there. And the other problem is the Fed's inflation fighting credibility has been severely eroded. Remember that whole issue, of course, what happened with inflation is transitory mantra a few years ago. That really hurt their credibility. They're going to have to be very careful here about cutting preemptorily and then turning out to be embarrassed like they were a couple of years ago. So again, the doves are looking for some signs. We're moving toward a rate cut. I don't know.

I don't think you have a lot of support here. Powell's going to have to at least show some data that confirms expectations of a rate cut. Otherwise, if you can't, they're just going to have to say what they're saying right here. They have to be attentive. The committee is attended to the risk to both sides of its dual mandate, and that's really what you're going to have to take away from this right now, guys. Bob Pisani, as always, my man, you nailed it. We're going to go to Rick in a second, but I want to come back to you, Bob, because I think

the point I was trying to make with Steve was not what's right or what's wrong, not for me to to say, I have no idea. But this idea that the Federal Reserve's credibility, for good or real, and not everybody would agree, I get it, but I can tell you, there are people here that will say, yeah, the Fed screwed up during COVID, left rates too low for too long,

then they kind of overreacted. You just said it. That inflation fighting credibility is, let's be clear, I think it's taken a bit of a hit and I don't know if the market is listening to the Fed as much as it used to. I would agree. So here's the problem.

There's two hurdles the doves have to overcome. The first is the data hurdle. The strong data of a clear downturn, the hard data, is not yet there. And the second is what you and I were just talking about. The Fed's inflation fighting credibility has been severely eroded, and I think they're going to be very attentive to that. You know, this is going to be an old story by Friday. Steve will confirm this.

I think there's eight or nine Fed officials. speaking on Friday and they're all going to have individual opinions on this. So we're going to have a very, very broad range of opinions very, very soon in the next couple of days that's going to help us get a better sense of where the Fed is right now. But the data is still not there. Bob, thank you. Now let's go to Chicago and Rick Santell, you can come on everything we just talked about. And I will also add this, that despite all the ups and downs of inflation, rates, whatever, whatever it may be, here's the bizarre point. I know it's moved. The 10-year-buyer bond yield is at 4.2, whatever it is, that's the same price it was two and a half years ago.

Yes, it fluctuated, Rick, but bizarrely over two and a half years, 30 plus months, the 10-year yield is exactly where it was before all of this. Comment on that, the Fed decision, or I should say, Fed non-decision. Well, you know what? You hit on so many key issues. That 10-year rate and the relationship it has with mortgages and this notion that, you know, are we ever going to get under a six and a half, 6.6% 30-year fixed mortgage? These are huge issues. And Bob hits something so important. And it's just so obvious. If you look at the data that, of course, put us at minus three-tenths of percent on GDP, what that tells you is that there's not going to be any real trusting data for a long time. To pull forward, that's going to have a distortion when we actually get more certainty on tariffs.

We're going to have a landscape where inventories are going to be okay for a while. So you're not going to get an accurate read on the economy, which means that the Fed doesn't really have any better information than any of our viewers have. And I don't mean that in a negative way. Also, when it comes to credibility, the Fed got dinged in another area that nobody really seems to talk about. doing a 50 basis point cut so close to that election. I can't tell you how many people and sources always bring that topic up in context of what you brought up, Brian, that when you look at everything going on today, what will be the trigger for rate cut, considering all the moving parts?

And finally, maybe the most important thing is look at two-year, look at 10-year, look at the dollar, okay? We're making new low yields in a small way because equity volatility, is really taking center stage and the dollar index has been steady. She goes final statistic. These Fed Fund futures prices right now are actually a little bit higher than they were at the last Fed meeting, which means that we still have a lot of easing built in over three. And the market is counting on it even though the Fed doesn't want to promise it's going to deliver.

So not that hawkish. In other words, Rick, thanks very much, Rick Santelli. We're just a few minutes away from the chair's press conference. It starts at 2.30 Eastern. We'll take you there live as soon as it happens. But first, we'll hear once again from Claudia Somm, and we'll take a quick break. Welcome back to Power Lunch. The Fed holding interest rate steady just now at the top of the hour.

And we'll be hearing from the Fed Chair Jerome Powell shortly. New Century Advisors, Chief Economist Claudia Sama, is back with us. Who, you kind of warned us, you thought it might be hogish? Well, would you go so far as to describe it that way? I'm not sure if I would describe it as hawkish. I think the statement reinforces that they see risk to both higher unemployment and higher inflation. So the dual mandate and conflict. Now, that is a situation.

We have not seen the Powell Fed in before, and frankly, it's not one. Thankfully, we've seen the Fed in very often. It's important that they really set the stage, and now it's going to be an opportunity for Powell to expand on what does that mean. How are we evaluating? It's not that they're putting more weight on inflation or on employment. or co-equal in the dual mandate, is just they're going to have to assess how far is inflation going off track?

How far is unemployment going off track? And then an important thing that Powell also talked about in his April speech was, and then how quickly do we think they'll get back on track? Like, how much work does the Fed have to do? That's this big discussion about, is inflation persistent? So what we really need to hear from the Fed

is just more about how are you thinking, what are you looking at? because they're going to have to get back in the business of doing some forecasting, too. Right. And we kind of mentioned this in passing, but there is this big budget bill out there that could have big effects on everything from the deficit to the near-term economy, the trajectory with which kind of tariffs affect all that. So maybe that he'll be asked about that point blank. I don't know how big of a factor that will be. Right.

And the Fed has said, and Powell has said before, they look at the totality of all the policy actions that are happening right now and everything else hitting the economy. So they have mentioned the fiscal policy is important to. And this is one where we're starting to get some more details. So, yeah, that will be interesting to see how that comes into the conversation. And, you know, there could be policies that diffuse some of the inflation risk, maybe in the deregulation. So it's just, it's really important that we understand how the Fed is looking at the data, looking at the policies, and they're going to have, there's going to be, if the dual mandate's intention, it's going to come down to a judgment call.

and we want to understand their judgment. If you had a question, would it be the show your homework question? In other words, like, tell us exactly which data points. For instance, on inflation, do you take things like the ISM prices paid into high account or no? I mean, would that be the question or would you do anything else on your mind that you'd ask him? I think getting as much detail out of the Fed as we can in terms of what they look at. I really am, I really do want to hear from them the use of being more creative and pulling. Like, how are you using some of the forward-looking, the kind of soft data measures?

Like, how are you sifting through? Because what, you know, there was, especially last year, there was kind of this, we'll wait and see. We have the luxury of time. We'll want more data. We knew every CPI release was really important. And we needed, like, probably not just one. We needed three good ones. And, like, that kind of answer, that's so heavy, backward-looking data dependent, will really put the Fed on a path to be behind the curve.

We don't know which curve they might be behind. But, like, this is just going to be a very fluid situation of fast-moving. So the more they can tell us, what are you pulling in other than just CPI and the unemployment rate? Like, we really need to have that information. I think that will help us understand. Claudia, thanks for joining us again. Claudia, Somme of New Century Advisors. And we're just moments away from the presser.

We'll get more reaction to that and the Fed decision when we return right after this. All right, welcome back to Power Lunch. A couple of minutes now until Jay Powell goes to the microphone, explains the decision to not change interest rates. the Federal Reserve, despite many calls to lower rates, doing nothing. We also have some Michael Santoli. We have some headlines from the Trump administration saying that there's not going to be any movement on the 145% tariffs. So kind of warring headlines in your world, you got Jay Powell over here, Trump and the tariffs over here. What are we focusing on?

We're focusing on the general lack of resolution to the big questions that every investor is fixated on, Brian. So I don't think that anybody should have expected any kind of clear leaning by. the Fed, especially in the statement. They're not responding in their minds to any particular emergency. Things on both sides could be risky. We think we have a little bit of time before we need to respond to that. That seems to be their message. On the trade front, yes, the stock market did wobble a bit on that comment by President Trump that he sees really no reason to lower that 145 percent tariff on China. On the other hand, it was in response to her question. It's not as if this was some statement of some fresh assessment of the situation. So that's why I think

the market is kind of hanging in there. It's a little bit apprehensive of making its next big move after this rally we've had. But I would argue just in equity land that given what's going on with Alphabet and Apple, that the market is managing to sort of rotate around and protect itself and the index is kind of hanging in there in a way that you might not expect if it was a more brittle tape. What's your take on all the trade stuff, Mike? I mean, if you had to rank them an order of importance right now. Would it be tariffs? Where does the tax bill fall? Then you have the Fed decision today, and maybe that's top level. Maybe the chair will say something that makes a top level. Yeah, I think it is tariffs for better or worse, even though trade itself is not the big

swing factor for this economy. You know, we have a, you know, a $1 trillion trade deficit on a $30 trillion economy. On the other hand, it's the biggest range of possibilities there in terms of a stackflationary shock or nothing at all or something very manageable. So I think incremental moves that seem substantive on de-escalation. I think some measure of de-escalation from here is largely priced in to the stock market. So that's why I think we're tracking it. It doesn't make sense in a $50 trillion stock market twitches on every one of these headlines, but it's kind of all we have to work with in the short term. Yeah, I would say things are twitchy. And by the way, we got to go to Powell, but tomorrow will be live, Kelly. Port of Long Beach. First-hand,

real world look at the ships, the cargo, the tonnage, what's important now, and more importantly, what's coming. That'll be tomorrow. Exclusive data should be very insightful, I think. We should stage a permanent camera there to count the ship activity and try to get a sense of what's going on in this economy. You know, that's a pretty good idea, actually. Have like a YouTube. We're going to go to Jay Powell right now in Washington, D.C. Good afternoon. My colleagues and I remain squarely focused on its use.

achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. Despite heightened uncertainty, the economy is still in a solid position. The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has come down a great deal, but has been running somewhat above our 2% longer run objective. 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. Pardon me? Following growth of 2.5 percent last year, GDP was reported to have edged down in the first quarter, selecting 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% 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 rebound,

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. In the labor market, conditions have remained solid.

Payroll job gains averaged $155,000 per month over the past three months. The unemployment rate at 4.2 percent remains low and has stayed in a narrow range for the past year. Wage growth has continued to moderate while still outpacing inflation. Overall, a wide set of indicators suggest that conditions in the labor market are broadly in balance and consistent with maximum employment. The labor market is not a source of significant inflationary pressures. Inflation has eased significantly from its highs in mid-2020,

but remains somewhat elevated relative to our 2% longer-run goal. Total PCE prices rose 2.3% over the 12 months ending in March. Excluding the volatile food and energy categories, core PCE prices rose 2.6%. 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 4.5 to 4.5 percent and to continue reducing the size of the balance sheet. The new administration is in the process of implementing substantial policy changes in four distinct areas, trade, immigration, fiscal policy, and regulation. The tariff increases announced so far have been significantly larger than anticipated. All these policies are still evolving, however, and their effects on the economy remain highly uncertain.

As economic conditions evolve, we'll continue to determine the appropriate stance of monetary policy based on the incoming data, the outlook, and the balance of risks. If the large increases in tariffs that have been announced are sustained, they're likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully, into prices and ultimately on keeping longer-term inflation expectations well anchored. Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time

increase in the price level from becoming an ongoing inflation problem. As we act to meet that obligation, we'll balance our maximum employment and price stability mandates, keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans. We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension. If that were to occur, we would consider how far the economy is from each goal and the potentially different time horizons over which those respective gaps would be anticipated to close. For the time being, we're well positioned to wait for greater clarity before considering any adjustments to our policy stance. At this meeting, the committee continued its discussions as part of our five-year review of our minds.

monetary policy framework. We focused on inflation dynamics and the implications for our monetary policy strategy. Our review includes outreach and public events involving a wide range of parties, including Fed lessons events around the country, and a research conference next week. Throughout this process, we're open to new ideas and critical feedback, and we will take on board lessons of the last five years in determining our findings. We intend to wrap up the review by late summer. The Fed has been assigned two goals for monetary policy, maximum employment and stable prices. We remain committed to supporting maximum employment, bringing inflation sustainably to our 2% goal, and keeping longer-term inflation expectations well anchored. Our success in delivering on these goals matters to all Americans.

We understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Fed will do everything we can to achieve our maximum employment and price stability goals. Thank you. I look forward to your questions. Steve Leesman, CNBC. Thank you, Mr. Chairman, for taking my question. A lot has happened since the last meeting.

There's been tariffs put on, tariffs taken off, and there's a bill advancing in Congress. And I just wonder if I could press you on the last part of your statement. Are you any closer now to deciding which side of the mandate is going to need urgent care first? Well, so as we noted in our in our statement, post-meeting statement, we've judged that the risks to higher employment and higher inflation have both risen. And this, by the way, of course, is compared to March. So that's what we can say. I don't think we can say, you know, which way this will shake out. I think there's a great deal of uncertainty about, for example, where tariff policies are going to settle out.

And also, when they do settle out, what will be the implication? for the economy, for growth and for employment. I think it's too early to know that. So, I mean, ultimately, we think our policy rate is in a good place to stay as we await further clarity on tariffs and ultimately their implications for the economy. Hearing you describe what you're looking for in terms of being able to make a decision, it sounded like that's a long-term process before you sound like you're going to be comfortable or the committee would be comfortable to act on what the data is telling you.

I don't think we know. You know, I think, look where we are today. We have an economy that if you look through, you know, the sort of distortions in Q1 GDP, you've still got an economy. It looks like it's growing at a solid pace. The labor market appears to be solid. Inflation is running just a bit above 2 percent. So it's an economy that's been resilient and is in good shape. And our policy is sort of modestly or moderately restrictive. It's 100 basis points, less restrictive than it was. last fall. And so we think that leaves us in a good place to wait and see. We don't think we need to be in a hurry. We think we can be patient. We're going to be watching the data. The data may move quickly or slowly, but we do think we're in a good position where we are to let things evolve and become clearer in terms of what should be the monetary policy response. Well, there's naturally a lot of TSD around 20-201, supply shots. But there are some who argue that the current situation has notable different 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 4%. What do you see right now that could nourish higher inflation beyond a rise in goods prices this year? I think the underlying inflation picture is good. It's what you see, which is inflation now running a bit above 2%. 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 has been resilient and is doing fairly well. Our policy is well positioned. The costs of waiting to see further are our, our, our, 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 about where tariffs are going to, 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. 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? You know, as I said, we're, we are comfortable with our policy stance. We think 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 monetary policy is. So we're not in that place. And as that develops, and I can't really give you a time frame on that. Janelle Marte with Bloomberg.

So many economists have been pricing in higher odds of a recession, and several are noting that it is more difficult for the Fed to cut rates preemptively, given the higher risks for higher inflation. So given the outlook, do you still see a path for a soft landing, and what does that look like? Well, let me say, I mean, so let's look back and see where we are. So go through 2024 up to the day. We've had, we've had, you know, unemployment in the low fours for more than a year.

We've had inflation coming down in the now in the mid to low twos. We've had an economy growing at two and a half percent. So that is the economy as we see it now. What looks likely, given the scope and scale of the tariffs, is that we will see, certainly the risks to higher inflation, higher unemployment have increased. And if that's what we do see, and if the tariffs are ultimately put in place at those levels, which we don't know, then we will see, we won't see further progress toward our goals. But we might see a delay in that. I think in the, you know, in our thinking, we would get, we would never, we never do anything but keep achieving those goals. But we would, at least for the next, let's say, year, we would, we would not be making progress toward those goals.

Again, if that is, if that's the way the tariffs shake out. The thing is, we don't know that. There's so much uncertainty about the scale, scope, timing, and persistence of the tariffs. So, so that's that. In terms of preemption, you know, I think you can look back at the 2000, 19 cuts as preemptive. I wouldn't say that what we did last fall was at all preemptive. If anything, it was a little late. But 2019, we did cut three times. But the situation was you had a weakening economy and you had inflation at 1.6%. So that's a situation where you can move preemptively. Now we have inflation running above target. It has been above target for four years. It's not so far above target now. And we have an expectation, conditional on what happens, that we have, that we have. we'll see upward pressure on inflation. If you look at where forecasters are, they're all forecasting an increase in inflation. So it makes it – and then we've also got, you know, forecasts of weakening in the economy,

and some have recession forecasts. We don't make – we don't make a – publish a forecast about that. We don't publish a forecast that assesses how likely a recession is. But in any case, it's not a situation where we can be preemptive because we actually don't know what the right response to – to the data will be until – we see more data. Colby Smith with the New York Times. How much weakness does the committee need to see, though, in the labor market and the economy

more broadly to lower interest rates again? Is it about a certain increase in the unemployment rate over a period of time or perhaps a certain number of negative monthly job reports? I mean, how are you making that assessment? You know, so first of all, we don't see that yet, right? We have 4.2 percent unemployment, good participation, wages behaving very well. participation I mentioned at a good level. So, you know, with the labor market,

we would look at the totality of the data. We'd look at the level of the unemployment rate. We'd look at the speed with which it's changing. We would look at the whole huge array of labor market data to get a sense of whether conditions are really deteriorating or not. And at the same time, we'd be looking at the other side of the mandate. We could be in a position of having to balance those two things,

which is, of course, a very difficult balancing. judgment that we'd have to make. On that point about balancing, I mean, you've mentioned that the committee would consider how far the economy is from each goal and the time it would take to kind of get back to that point. But what does that mean in practice? I mean, how much of that assessment will be rooted in a forecast versus data dependence? It would be a combination of the two. I mean, let's just say this would be a complicated and challenging judgment that we would have to make. Yeah, if, and this is, we're not in

this situation, but the situation is if the two goals are in tension, so let's say that unemployment is moving up in an uncomfortable way, and so is inflation. Not the situation we're in, hypothetically, but we would look at how far they are from the goals, how far they're expected to be from the goals, what's the expected time to get back to their goals? We'd look at all those things and make a difficult judgment. And that's in our framework. It's always been in our thinking. You know, we haven't faced that question in a very long time. And so, again, difficult, difficult judgment to make. And not one that we face today, and we may never face it,

but, you know, we have to be keeping it in our thinking now. Thank you. Edward Lawrence with Fox Business. So we had the CPI report that came out that showed month over a month, the first decrease in inflation in about three years. The jobs report, he said, solid that we saw. At the same time, we have those new tariffs that we're living under. So given this, should the Federal Reserve be cutting rates at all this year? You know, it's going to depend. I think you have to just take a step back and realize this is this is why we are where we are is, you know, we're going to need to see how this evolves.

There are cases in which it would be appropriate for us to cut rates this year. There are cases in which it wouldn't. And we just don't know. Until we know more about how this is going to settle out and what the economic implications are for employment and for inflation, I couldn't confidently say that I know what the appropriate path will be. So following on that, just, you know, so then how does President Trump calling on you personally, as well as the Federal Reserve, to make rate cuts affect your decision today and affect your job difficulty? Doesn't affect our doing our job at all. So, you know, we're always going to do the same thing, which is we're going to use our tools to foster maximum employment and price stability for the benefit of the American people.

We're always going to consider only the economic data, the outlook, the balance of risks, and that's it. That's all we're going to consider. So it really doesn't affect either our job or the way we do it. Hi, Howard Schneider, with Reuters, and thanks for the time. I'm wondering, I mean, given the complexity about the first quarter GDP and what lies ahead, I'm just wondering what your intuition tells you about the underlying direction of the economy right now. many of your colleagues have said they feel growth is slowing. If so, do you have any sense of by how much to what degree the slowdown may be? What does your gut tell you about how

things are evolving out there? My gut tells me that uncertainty about the path of the economy is extremely elevated and that the downside risks have increased. The risk is, as we pointed out in our statement, the risks of the risks of higher unemployment and higher inflation have risen, but they haven't materialized yet. They're not really not in the data yet. So that and that tells me more than by intuition because I think I think it's obvious actually that the right thing for us to do is that we're in a good place, our policies in a very good place, and the right thing to do is await further clarity. And I, you know, there's usually things clarify and that the appropriate direction becomes clear. That's what usually happens.

Right now, it's very hard to say what that would be. In the meantime, the economy is doing fine. Our policy isn't, you know, it's not highly restrictive. It's somewhat restrictive. It's 100 basis points less restrictive than it was in, you know, last summer. So we think it's in a good place, and we think the appropriate thing is for us to wait and see and get more clarity about the direction of the economy. Well, let me pressure on this idea of the economy. being fine right now because reading the page book very closely the last time around, there was a lot of 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 sediment's sour. But the beige book was

talking about 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? It may well. It just hasn't shown up yet. And, you know, we all look at all these sentiment 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 hadn'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 that. But in the meantime, yes, we're watching it extremely carefully like everyone is, but don't see really much evidence of it in actual economic data yet. And by the way, consumers keep spending, credit card spending. It's still a healthy economy, albeit one that is shrouded in some very downbeat sentiment on the part of people and businesses. Michael McKeever from Bloomberg Radio and television.

The Fed's been criticized recently by a former governor for what he calls mission creep. You take on more problems, use more tools, and then end up building tools to deal with the fallout of those tools. which then makes it a given that you will act more aggressively in the future. Is that a fair critique and is that something you would be looking at in your framework review? Sorry, say the critique again. That the Fed has been involved in mission, gets involved in using too many new tools to deal with problems and to go too far. Is that something that the critique was based around the fact that you did QE and QE and QE and QE and and went beyond the narrow confines of your mandate.

So, well, I mean, there are a couple, that's not really beyond the confines of our mandate. Look, I would say this. We, you know, we did things. Essentially, we're on an emergency footing for a couple of years in the pandemic, and it's very fair and very welcome for people to look back over what we did and say, hey, you could have done this better and different. And one thing we hear a lot is we could have explained QE a little better. We did think we were explaining it in real time. I completely accept the thought that we could have explained it better.

There's a lot of thinking that we went on too long with QE. I can tell you that the reason we did was we were concerned that we didn't want a tightening of a sharp tightening in financial conditions at a time when we thought the economy was still vulnerable. And so we did hold on for a long time to QE and we, of course, tapered and everything. And then we immediately went into QT, and, you know, we've, we're down a couple of trillion. But I get the, you know, we certainly with the benefit of hindsight could have tapered earlier or faster. That's absolutely right. But this is all very welcome. You know, it's, you know, we knew doing this in real time that we weren't going to get it perfect.

And those kind of, you know, after action kind of looks are essential. And we're doing the same thing, you know, in our review. on some issues. The other part of that critique is that you've taken on topics that are outside of the mandate, such as climate change and trying to ensure that certain groups are benefited by your economic policies in terms of employment, etc. So, okay, on climate, you've heard me say over and over again that we will not be climate policymakers and that our role on climate is a very, very narrow one. And I think that's what we've done.

We've done really very little on climate. You can say that was that little bit that we've done was too much. But I wouldn't want to give any impression that we've taken climate and it's something that we're spending a lot of time and energy on. We're not. We have very, very narrow things. We did one thing, one guidance for the banks. And then we did a one-time stress analysis, climate stress analysis, and that's it. And we dropped out of the network of greening the financial system. So we didn't do much on climate. But I do think, and I've said this publicly several times, I think it's a real danger for us to try to take on a mandate like that, which is very narrow application to our work.

And the risk is if you go for things that are really not on your mandate, then why are you independent? And I think that's a very fair question. I do think we've done a whole lot less on climate than some people seem to think we did. Anyway, that's what I think. Should you have taken on the question of bringing unemployment rates down for specific categories? We didn't do that. You know, we said what we said was that we never targeted any unemployment rate for individual racial demographic group. So what we said was that maximum employment was a broad and inclusive goal.

And I think what we meant by that was we're going to consider the totality of the country as we look at our maximum employment goal. Of course we were never going to target any individual group with that. But I think some people, you know, wanted to hear it that way. But that's not at all what we meant. But so that's just not a correct reading of our, but I can, I can can see how, you know, maybe people found that confusing, and, you know, we have to take that into consideration. Hi, Chair Powell, thanks for taking our questions today. I'm Jo Lincent with CBS News. You've said wait and see, and the economy is doing fine today, but the impact of tariffs are

already showing up at the ports. Businesses big and small are telling us that they feel it, and most importantly, consumers say they feel it, that the challenges are here and there's no waiting and seeing. For Main Street, what is the breaking point? What would have to happen to prompt a rate cut specifically? Well, you know, so we we really don't see in the data yet big economic effects. We see we see sentiment there are concerns that higher prices may be coming or things like that. So people are they're worried now about inflation. They're worried about about the, you know, a shock from the tariffs, but they really haven't, that shock hasn't hit yet. Okay, so you know, we're going to be looking at the at the not just the

sentiment data, but also the real economic data, as we assess what it is we should do. And remember, there would be two effects. One of them would be weakening economy, weakening economic activity, which translates into higher unemployment, and the other would be potentially higher inflation. Again, to say it again, the timing, the scope, the scale, and the persistence of those effects are very, very uncertain. So it's not at all clear what the appropriate response for monetary policy is. at this time, and by the way, our policy is in a good place, so we think we can wait and move when it is clear what the right thing to do is.

Really not at all clear what it is we should do. So people are feeling stress and concern, but unemployment hasn't gone up. Job creation is fine. Wages are in good shape. You know, people are not layoffs or people are not getting laid off at high levels. You know, initial claims for unemployment are not increasing. you know, in any kind of impressive way. So the economy itself is still, you know, in solid shape. Just a quick follow up. President Trump now says he does not plan to remove you as chair.

When you heard that, what did you think? I don't have anything more for you on that. I've pretty much covered that issue. Thank you. Hi. Thank you. Chris Ruegaver, Associated Press. Well, I just wanted to follow up earlier. It sounded like you said it was unclear how the Fed, you know, what kind of interest rate decisions you will make later this year. So does that, you know, in March, there was guidance that two cuts might happen, you know, two cuts were penciled in for this year. Is that now that guidance from the last press conference? Has that been overtaken by events at this point? You know, we don't do a

summary of economic projections at every meeting, as you know, we do it every other meeting. And so this was the meeting when we didn't do it. And I, I, you know, we don't also kind of poll people, so I really wouldn't want to try to make a specific projection for where we are relative to that. We will, in six weeks, we had the June meeting, and you'll have another SEC. I'm not going to hazard a guess here today as to what it would be. Again, what I would say is that we think our policy rate is in a good place. We think it leaves us well positioned to respond in a timely way to potential developments. That's where we are.

And that, depending on the way things play out, that could include rate cuts. You know, we can include us, could include us holding where we are. We just are going to need to see, you know, how things play out before we make those decisions. Great. And just to follow up on that, I mean, when you address the issue of how the Fed would handle both rising unemployment and rising inflation, how are you thinking about the fact that addressing one? could exacerbate the other. So a rate cut to reduce unemployment could worsen inflation and vice versa. How do you handle those challenges?

Well, you just captured the, this is the issue with the two goals being in tension. It's a very challenging question. Now, there can be a case in which one goal is very far. One variable is very far from its goal much farther than the other. And if so, you concentrate on that one. And frankly, that was the case. Well, it wasn't a case. where they were really in tension. But if you go back to 2022, it was very clear that we needed to focus on inflation. The labor market was also super tight, so it wasn't really a tradeoff. You know, if, I think you know what our framework document says. It says we'll look at how far each goal, each variable is from its goal, and also will factor in the time it would take to get there. So, you know, that's going to be potentially a very difficult judgment.

But the data could break in a way that it's not. You know, I just don't think we know that. The data could easily favor one or the other. And right now, there's no need to make a choice and no real basis for doing so. Victoria. Hi, Victoria Guido with Politico. I wanted to ask, Congress is currently debating spending cuts alongside extending the tax cuts. And I know you've talked many times about how the path of the debt is unsustainable,

But given that we're also talking right now about the economy slowing, potentially even recession, I was just wondering, is there a danger that spending cuts now could slow growth a lot more? You know, we don't give Congress fiscal advice. They're going to do. We take what they do as a given, and we put it in our models and in our assessment of the economy. So I wouldn't want to speculate on that. I mean, I think we do know that the debt is on an unsustainable level, on an unsustainable path, not at an unsustainable level, but an unsustainable path.

And it's up, it's on Congress to figure out how to get us back on a sustainable path. And, you know, it's not up to us to give them advice. Do you think that they should take macroeconomic conditions into account as they look at this? I think they don't need my advice and our advice on how to do fiscal policy, any more than we need their advice on monetary policy. Thank you. Thanks, Mr. Chairman. with the Washington Post. In your Jackson Hole comments last year, you said you would not welcome

further cooling in labor market conditions. The unemployment rate then was 4.2%, which is what it is now. Forecasters, many forecasters now predict a higher jobless rate. How has your tolerance for weakening labor market conditions changed compared to a year ago? So it was quite a different situation. What was happening last year is that over the space of six, eight, seven months, the unemployment rate went up by almost a full percentage point. And it was click, click, click, click, click each month. And, and, you know, everywhere, people were talking about downside risk to the labor market. At the same time, payroll job numbers were getting softer and softer. So there was a really obvious concern about downside risk to the

labor market. And so at Jackson Hole, and then in September, you know, we wanted to address that forthrightly. We wanted to show that we were there for the, I mean, we'd been there for inflation for a couple of years, and we wanted to show also that we're there for the labor market. And it was important that we send that signal. Fortunately, since then, the labor market has really, and the unemployment rate have really been moving sideways at a level that is, you know, well in the range of mainstream estimates of maximum employment. So that concern has gotten a lot less. So you're at 4.2 percent unemployment. I think we were in a very different situation. Now, now we have a situation where, you know, the risks to higher inflation and higher unemployment

have both gone up, as we noted in our statement, and we've got to monitor both of those. We actually have a potential situation where there may be a tradeoff or tension between the two, potentially. We don't have it yet, and we may not have it, but that's what we have, and that's why I think it's a very different situation. I mean, I guess I want to follow up by asking how much of a rise in the job list rate you would you could tolerate it i can't i can't give you a you know i'm not going to try to give you a specific number i'll just say we're got we have to now be looking at both variables and which of them is is you know demanding if if one of them is demanding our focus more than the other that would tell us what to do with policy if they're more or less

this you know equally distant and equally or or not distant then we don't have to make that assessment, you know, the assessment is you wait. So I'm not going to try to be really specific about what we need to see in terms of a number. But look, if we did see, you know, significant deterioration in the labor market, of course, that's one of our two variables, and we would look to be able to support that. You'd hope that it wasn't also coming at a time when inflation was getting very bad. And again, we're speculating here. We don't know this. We don't know any of these things. It's very hypothetical. We're just going to have to wait and see how it plays out.

Thanks. Claire Jones, Financial Times. In terms of getting some clarity, we've got some talks at the weekend in Geneva between the U.S. and China. A lot of economists are attaching an awful lot of importance to what we hear from those talks. How much importance are you attaching to them in terms of judging what will happen to the U.S. economy going forward? And just in a similar vein, some economists are saying it's days, not weeks that we have until we start to put the U.S. economy at risk of seeing the sort of pandemic era shortages and higher prices if we don't kind of soothe relations between the U.S. and China.

So it would be good to have your view on that too. So, you know, these are not talks that we're in any way involved in, so I really can't comment directly on them. So, but what I will say is this, you know, we had, coming out of the March meeting, we, we, the public generally had an assessment of where tariffs were going. And then April 2 happened and it was really substantially larger than anticipated in the forecasts that I've seen and in our forecasts. So, and now we, and now we have a different, we're in a new phase where it seems to be we're entering a new phase where the administration is entering into beginning talks with a number of our important trading partners. and that has the potential to change the picture materially or not. And so I think it's going to be very important how that shakes out. But we simply have to wait and see how it works out.

It certainly could change the picture, and we're mindful of not trying to make conclusive judgments about what will happen at a time when the facts are changing. Just on the falling ship and volumes from China over these tensions. I mean, do you show that concern that we could start seeing good shortages and higher prices in the coming weeks

if this isn't resolved very quickly? You know, I don't want to get my... We're not... We shouldn't be involved even verbally in questions about the timing of these things. Yes, of course, we follow all that data. We see the shipping data. We see all that. But ultimately, this is for the administration to do. This is, you know, this is their mandate, not ours.

I know there, as you can see, they're again beginning to have talks with many nations, and that has the potential to change the picture materially. So we'll just have to wait and see. Korsuke Takami with Nikai. Thank you for doing this. The volume of imported goods increased significantly in the first quarter, do you think that this situation could cause a delay in the impact of tariff on inflation? And does this mean that it will take longer time to reduce uncertainty?

The decision we made today? Which decision? So the future decision. So the volume of the imports, imported goods increase significantly. So the impact of the imported inflation may delay. So what is the impact to your future decision? Okay, so I mean, I think we, I think we think that the, you know, there was a big spike in imports, right? Very big, historically large, really.

And to beat tariffs. And now that should actually reverse so that it's, you know, it's the difference between its, it's exports minus imports. So, and imports were huge. And so that it conveyed a very negative. contribution to US GDP annualized GDP in the first quarter as we all know so that could in the second quarter be reversed so that we have you know an unusually large contribution to usually positive that's very likely as as imports drop sharply you could also have you know very likely you'll have restatements

of the of the first quarter it'll turn out that consumer spending was higher it'll out that inventories were higher. And so you'll see those data revised up. It may actually go into the third quarter, too. And so I think this whole process is going to a little bit make it harder to make a clean assessment of U.S. demand. I mentioned private domestic final purchases, which doesn't have inventories government or inventories government. But anyway, it's a cleaner read on private demand. But that, too, probably was flattered a little bit by, you know, by strong demand for imports to beat tariffs. So that might overstate.

It's a really good reading, 3% PDFP in the first quarter. That might actually overstate. So it's not really going to, I don't think it's going to affect our decisions. I will just say, though, that it's a little confusing, and it's probably less confusing to us than it would be to, the general public as we try to explain this. You know, it's complicated and, you know, GDP is sending a signal. It's a little bit confusing, but I think we understand what's going and it's not really going to change things for us. Courtney Brown from Axios. I guess, you know, we talked about some of the indications of potential layoffs, price hikes, and 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? No. I mean, it's, 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, So that's why we're waiting. 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. How are you thinking about that

when interpreting some of the signs in the softer survey data? 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 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 outsize change in sentiment, though. And so none of us is looking at this in saying that we're sure one way or the other. We're not. Thanks, Chair Powell. Matt Egan with CNN. So you mentioned earlier that you're monitoring the shipping data, and we have seen in the shipping data that imports from China into the port of Los Angeles have plunged. And that has raised concerns about potential shortages. What tools, if any, does the Fed have to ensure that prices and inflation expectations don't get out of hand if tariffs do cause significant supply chain disruptions?

I mean, we don't have, you know, the kind of tools that are good at dealing with supply chain problems. We don't have that at all. That's a job for the administration and for the private sector more than anything. You know, what we can do with our interest rate tool is we can support, be more or less supportive of demand. And that'd be a very inefficient way to try to fix supply chain problems. But, you know, we don't see the inflation yet. We're, of course, reading the same stories and watching the same data as everybody else.

And, you know, right now we see inflation, you know, kind of move sideways at a fairly low level. If I could follow up on that, President Trump has indicated that he, he will likely name a replacement for you when your term as chair expires next year. But your position on the board runs through January 2028, I believe. Would you consider remaining on the Fed board, even if you're no longer chair? So I don't have anything for you on that. My whole focus is on and my colleagues focus is all on, you know, trying to navigate this tricky passage we're in right now,

trying to make the right decisions. You know, we want to make the best decisions. for the people that we serve. That's what we think about day and night. And this is a challenging situation, and that's 100 percent of our focus right now. Let's go to Jennifer. Thanks so much. Chair Powell, Jennifer Sean Berger with Yahoo Finance. Public records of your schedule so far this year show no meetings with President Trump. Past presidents, Obama, Bush, and Clinton have all met with Fed chairs. And you met with Trump during his first term. Why haven't you asked for a meeting yet with the president?

I've never asked for a meeting with any president, and I never will. It's not, I wouldn't do that. There's never a reason for me to ask for a meeting. It's always been the other way. So would you want to meet with him, if given the opportunity to get more information? It's never an initiative that I take. It's always an initiative. I, you know, I don't think it's up to a Fed chair to seek a meeting with the president,

although maybe some have done so. I've never done so, and I can't imagine myself doing that. I think it's always comes the other way. A president wants to meet with. with you, but that hasn't happened. And if I could just ask one question, a monetary policy. When it is time to cut rates, how will you determine how far down rates will have to come to try to keep a balance on the inflation mandate as employment weakens?

You know, I think once you have a clear direction, you can make a judgment about how fast to move and that kind of thing. So it's really the harder question is the timing, I think, and when will that become clear? And fortunately, as I mentioned, we have our policy in a good place, the economy is in a good place, and it's really appropriate, we think, for us to be patient and wait for things to unfold as we get more clarity about what we should do. Thanks very much.