Fed Meeting Highlights: Fed's independence crucial to price stability, says Jerome Powell

Independence, Powell says, is essential to the Fed doing its job.

It’s what allows policymakers to act “when we need to do [things] to preserve price stability,” he said, adding that central bank independence is a widely accepted standard with backing in Congress.

Jerome  Powell said he would reserve the term stagflation for "a much more serious set of circumstances."

"When we use the term stagflation, I always have to point out that ... was a 1970s term at a time when unemployment was in double figures and inflation was really high and the misery index was super high. Add them together, you get the misery index. And that's not the case right now," said Powell.

"What we have is some tension between the goals, and we're trying to manage our way through it. It's a very difficult situation, but it's nothing like what they faced in the 1970s," he said, referring to the Fed's dual mandate of maximum employment and stable prices.

Jerome  Powell said that while there are indicators of some stability, the committee is concerned about "the very, very low level of job creation."

The Fed chair said that if data is adjusted for overcounting, "effectively, there's zero net job creation in the private sector."

But, he said, that appears to be "about what the economy needs in terms of of dealing with very, very low, nonexistent really, growth in the labor force, which of course, we've never had in our history."

Powell added that the labor force trend could be the consequence of immigration policy. "That's the biggest factor there."

Powell said he will stay on as a Fed governor while a criminal investigation into him is ongoing.

"I have no intention of leaving the board until the investigation is well and truly over with transparency and finality," he said.

The Trump administration has asked a judge to reconsider his ruling that has effectively blocked the investigation into Powell over cost overruns in renovations at the central bank's headquarters. Powell disclosed the investigation on January 11, denouncing it as a threat to the Fed's independence.

Speaking to reporters on Wednesday, Powell said he has not made a decision if he will stay on the board after the investigation is finished.

His term as chair ends in May, but his term ⁠as a Fed governor extends to January 2028.

Asked what would happen if there was no new Fed chair confirmed by mid-May, Powell said:

"If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed," he said,

"That is what the law calls for. That's what we've done on several occasions, including involving me."

Powell said any negative impact from higher oil prices on economic activity and spending "would be offset to some extent by the fact that our oil companies will be more profitable and they may even do more drilling."

"If you ask oil companies about doing more drilling, though, they're going to want to see, you know, a consistent rise in oil prices from where they were before the build-up for the war. And they're going to want to believe that that's going to be persistent for a fairly, fairly long time."

Powell said there isn't much domestic oil drilling happening now.

"But some of that could happen over time," he added.

Answering a reporter's question about whether the Fed should look through inflation caused by higher oil prices due to the Iran war, Powell said:

"We're well aware of the performance of inflation over the last few years and how a series of shocks have interrupted progress that we've made over time. And that happened most recently with tariffs and now there will be some effects on inflation coming forward."

"The thing that's really important that we see this year is progress on inflation through a reduction in goods inflation, as the one-time effects on prices of tariffs go through the system, go through the economy. That's the main thing we're looking for going into this exercise. And we need to be seeing that to sort of understand that we actually are making progress."

Talking about views within the monetary policy committee, Jerome Powell said, "There was actually some movement ... a meaningful amount of movement toward fewer cuts by people. So four or five people went from ... two cuts to one cut. And each person has individual stories behind what they want to do."

"The forecast is that we will be making progress on inflation, not as much as we had hoped, but some progress on inflation. It should come as we start to see in the middle of the year, progress on tariffs, you know, going through once and then inflation coming down," he added.

"You know the rate forecast is conditional on the performance of the economy. So if we don't see that progress then you won't see the rate cut."

"We see the current stance of monetary policy as appropriate," Powell said as he began his press conference.

After recapping the Fed's decision and latest projections, he touched on the Iran war.

"The implications of events in the Middle East for the U.S. economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy," he said.

The U.S. dollar strengthened against other major currencies, on track to claw back losses from the past two sessions.

The dollar strengthened 0.71% to 0.79 against the Swiss franc. The euro was down 0.24% at $1.151.

The dollar index was up 0.28% to 99.83.

The dollar has strengthened overall since the Middle East conflict almost three weeks ago, reaching a 10-month high late last week as the conflict and rising oil prices drove investors into safe-haven U.S. assets.

US stocks held onto losses Wednesday after the Federal Reserve left interest rates unchanged and said economic uncertainty remains elevated amid an escalating Iran conflict and higher-than-expected inflation data.

The S&P 500 Index is down 0.7% as of 2:11 p.m. in New York, immediately following the rate decision. Consumer staples stocks are leading the decline, with Amazon.com, Inc. among the biggest laggards, dropping 1.9%. Energy companies see gains as Brent crude oil prices spike to about $106. The tech-heavy Nasdaq 100 dropped 0.6%. The Cboe Volatility Index hovered around 23 from highs last week.

"Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has been little changed in recent months. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the U.S. economy are uncertain. The Committee is attentive to the risks to both sides of its dual mandate.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Beth M. Hammack; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; Anna Paulson; and Christopher J. Waller. Voting against this action was Stephen I. Miran, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting."

The US Federal Reserve raised the outlook for its preferred inflation gauge to 2.7 percent by the end of 2026, with expected price shocks due to the war in Iran.

In its Summary of Economic Projections, the Fed lifted its expectations for headline PCE inflation to 2.7 percent from 2.4 percent.

Its expectation for core inflation, which excludes volatile segments, rose from 2.5 percent to 2.7 percent.

Jobs gains have remained low, inflation remains somewhat elevated

The vote in favor of the policy decision was 11-1

Governor Stephen Miran dissented in favor of a 25-basis-point rate cut.

Fed leaves rates unchanged, signals one rate cut later this year.

US Fed raises inflation outlook by end-2026 to 2.7%

Oil prices surged Wednesday following a strike on one of Iran's gas facilities that raised the spectre of a further escalation of attacks on energy infrastructure in the Gulf region.

Stocks markets slid after a closely watched US inflation gauge came in hotter than expected, as the US Federal Reserve was holding an interests rate meeting.

Wall Street remained on edge as Iran’s vow to retaliate against strikes on a key gas field lifted oil prices, with stocks and bonds falling on fears that could trigger further disruptions and fuel inflation.

As traders moved away from the riskier corners of the market, the S&P 500 halted a two-day gain. Brent hovered near $110. In the run-up to the Federal Reserve decision, Treasury yields rose as producer prices accelerated, with traders reducing bets on even a single rate cut in 2026

Wall Street's main indexes slipped after data showed ​producer prices rose more than expected in February, prompting investors to price out hopes of a Fed interest rate cut this ‌year.

The Labor Department said the Producer Price Index rose 3.4% year-on-year, above economists' 2.9% forecast, with prices at risk of accelerating further as the Middle East conflict lifts shipping and oil costs.

Traders now see the central bank lowering borrowing costs by at least 25 basis points in April 2027, compared with December 2026 seen before the report, according to LSEG-compiled data.

Fresh signs of a weakening labour market, along with concerns over oil-driven inflation, are putting Federal Reserve officials in a difficult position: whether to keep borrowing costs unchanged to prevent inflation from rising further or cut rates to support a slowing job market.

A US Department of Labour report earlier this month showed employers unexpectedly cut jobs in February, while the unemployment rate climbed to 4.4%.

Private-sector hiring has also been subdued, with fewer than 300,000 jobs added so far in 2025 — marking the weakest year since 2009, excluding the 2020 COVID-19 shock, the report said.

At the same time, US consumer prices rose moderately in February, according to a report last week. Households faced higher costs for gasoline and groceries, with further increases expected amid the escalating war in the Middle East.

With the U.S.-Israeli war against Iran boosting oil prices, a cooling in consumer spending is likely.

The average price of gasoline in the U.S. was $3.84 per gallon on Wednesday morning, up from $3.79 on Tuesday, according to data from motorist advocacy group AAA.

That level represents a roughly 28% increase from before the start of the war.

Large-scale gasoline price increases risk pushing up already-high levels of inflation that are in turn already elevated by Trump’s campaign of large-scale tax increases on imports.

The futures market provides a real-time view of what investors expect from the decision makers at the Fed.

Ahead of Wednesday's decision, they've been increasing their bets on a hold with a 99% probability of no change in interest rates priced into contracts the last time prices settled.

Alongside its rate decision, the Fed will release its summary of economic projections, including the rate forecasts known as the "dot plot".

In January, the Fed held interest rates steady amid what Powell described as a solid economy.

"The economy has once again surprised us with its ‌strength," Powell said on January 28.

Fed policymakers voted 10-2 to hold interest rate in the 3.50%-3.75% range.

Bond traders see it even less likely that the Federal Reserve will cut interest rates this year as Middle East warfare put upward pressure on oil prices and a US inflation gauge rose more than expected.

Markets further downgraded the chances of a rate cut as oil benchmarks approached their highest closing levels since 2022, spurred by reports an Iranian field was impaired by the latest attacks on the region by the US and Israel. Oil prices contribute to US consumer inflation in the short term via retail gasoline, where the national average is up about 30% this month.

Gold declined for a sixth day, its longest losing streak since late 2024, as surging energy prices and a hotter-than-expected inflation report added to speculation that the Federal Reserve will hold off from cutting interest rates this year.

Bullion tumbled as much as 3.4%, reaching its lowest level in more than a month. Crude rallied on signs of escalation in the Iran war that puts more energy supplies at risk. The latest development in the Middle East conflict led to a selloff across risk assets, including equities, which forced some investors to sell their gold holdings to raise cash.

The U.S. dollar strengthened against other major currencies on Wednesday, clawing back losses from the past two sessions after data showed a more-than-expected increase in U.S. producer prices.

The data indicates the Federal Reserve might take longer to cut interest rates amid elevated oil prices driven by the Middle East conflict. The Fed is widely expected to hold rates steady later on Wednesday.

Data from the U.S. Labor Department showed that the Producer Price Index surged 0.7%, while economists polled by Reuters had forecast a 3% rise.

Brent crude prices rose more than 4% on Wednesday after Iran's Revolutionary Guards threatened several energy facilities across Saudi Arabia, UAE, and Qatar in retaliation for an attack on its energy sites, heightening the risk of further disruptions to energy supplies in the region.

With no signs of de-escalation in the Iran conflict, benchmark Brent futures prices have settled above $100 per barrel for the past four sessions.

Brent futures were up $4.53, or 4.4%, at $107.95 a barrel by 1321 GMT on Wednesday, having risen to as high as $108.60 earlier in the session.

U.S. West Texas Intermediate crude gained $1.91, or 2%, to $98.12.

Donald Trump on Wednesday temporarily waived a century-old shipping law to help ease energy costs that have surged since US-Israeli strikes on Iran plunged the Middle East into war.

Trump's move to issue a 60-day Jones Act waiver would lift a ban on foreign-flagged vessels transporting cargo between US ports over this period.

It is a step to mitigate "short-term disruptions to the oil market" from the conflict, said White House Press Secretary Karoline Leavitt in a statement. "This action will allow vital resources like oil, natural gas, fertilizer, and coal to flow freely to US ports for sixty days."

Shares fell on Wednesday, paring earlier gains as oil prices surged, with investors rattled by fresh developments in the Middle East conflict ahead of a key Federal Reserve meeting.

"Everything was relatively optimistic earlier on... I think the catalyst for the reversal is really these headlines we had earlier regarding the attacks on gas and oil fields in Iran," said Mike Brown, senior research strategist at Pepperstone.

Brent crude futures were up 4.7% to $108.32 a barrel, while U.S. West Texas Intermediate rose 1.9% to $97.98.

S&P 500 futures and Nasdaq futures both fell 0.5%. Europe's STOXX 600 was down 0.6%.

US Federal Reserve policymakers began a meeting where they were expected to leave interest rates unchanged, as the US-Israel war on Iran sends shock waves through oil markets and supply chains, while economic data has begun to show weakness. The Fed will make its announcement of the benchmark lending rate in the world's largest economy at 2:00 pm US Eastern Time (1800 GMT). The central bank will also release its quarterly outlook for GDP growth, inflation and unemployment -- closely watched for potential revisions.

Canada's central bank held its key lending rate at 2.25 percent on Wednesday and said it was watching for an inflation spike caused by higher energy prices triggered by the Middle East war.

"The war in the Middle East has increased volatility in global energy prices and financial markets, and heightened the risks to the global economy. The breadth and duration of the conflict, and hence its economic impacts, are highly uncertain," the Bank of Canada said.

US wholesale inflation was hotter than expected in February on a services cost boost, government data showed Wednesday, in an indication of producer prices before the start of the war in the Middle East.

The Producer Price Index (PPI) rose by 0.7 percent on a month-on-month basis, said the Labor Department. Analysts had expected a cooler 0.3 percent increase.

Compared to the same period a year ago, PPI was up by 3.4 percent -- the biggest 12-month advance since February 2025 -- the report said.

Gold prices fell to a one-month low on Wednesday as investors weighed the risk of a more hawkish U.S. Federal Reserve policy stance, with high oil prices fuelling concerns about inflation.

Spot gold fell 2% to $4,903.19 per ounce as of 1216 GMT, its lowest level since February 18. U.S. gold futures for April delivery also dropped 2% to $4,907.40.

S&P 500 futures were largely unchanged after the benchmark index logged its first consecutive gains since the conflict began. Brent crude rose 2.5% to near $106 following the attack on the South Pars gas field. The dollar remained flat, while gold fell to a one-month low.

US President Donald Trump questioned Federal Reserve Chair Jerome Powell over when interest rate cuts would be implemented, asking at what point it would become “too late” to act.

With the Middle East war pushing global oil prices higher—raising risks of inflation and slowing growth—analysts believe policymakers are unlikely to take any immediate action.

Although consumer inflation has eased from its 9.1 percent peak during the Covid pandemic, it still remains above the Fed’s target, leaving households strained after years of rising prices.

The US Federal Reserve began its two-day policy meeting on Tuesday, with an announcement on the benchmark lending rate in the world’s largest economy expected at 2:00 pm US Eastern Time (1800 GMT) on Wednesday.

The central bank is also set to release its quarterly Summary of Economic Projections, where its forecasts for GDP growth, inflation and unemployment will be closely tracked for any signs of downward revision.

The US Federal Reserve reduced interest rates three times in a row last year before keeping them unchanged at its January meeting.

The central bank operates under a dual mandate to keep inflation close to its long-term target of 2 per cent while also supporting maximum employment.