Jerome Powell, chair of the U.S. Federal Reserve (Fed), reaffirmed a cautious stance on interest rate cuts after holding the benchmark interest rate steady. Powell noted that uncertainty surrounding tariff policy remains high and stated he would wait until economic changes become clearer.

Jerome Powell, Chair of the Fed. /Courtesy of EPA=Yonhap News

Powell said at a news conference held immediately after the Federal Open Market Committee (FOMC) meeting on the 18th (local time), "We are in a good position to wait until we have a better understanding of the future course of the economy before considering policy adjustments." The Fed held the benchmark interest rate steady at 4.25% to 4.50%.

He pointed out regarding the tariff policy of the Donald Trump administration that "while uncertainty has somewhat decreased, it remains at a high level," adding that "tariff increases are likely to raise prices and burden economic activity."

He continued, "Some effects of the tariff policy are already appearing, and its impact will expand over the next few months." He particularly noted that price increases due to tariffs have been confirmed in some consumer goods such as personal computers and audio-visual equipment.

However, he emphasized that "the scale, duration, and the time it takes for tariff effects to appear are all highly uncertain." He remarked that "the impact of tariffs on inflation can be short-term or long-term," stating that "maintaining stable long-term inflation expectations is key."

On the same day, the Fed released its revised economic outlook (SEP) dot plot, which maintained the forecast for interest rate cuts at two times (based on the median). In response, Powell said, "Each Commissioner has judged the path of the benchmark interest rate based on the most likely scenario," noting that "no one can be certain about the future path of interest rates."

"We have never experienced a situation like this, and we must be humble about our predictive capacity," he said, showing a cautious attitude toward providing further direction on currency policy.

"Inflation may or may not reach the target level in the future, and the labor market may weaken or not," he added, noting that "there are truly various scenarios."

In response to Powell's cautious remarks, the financial market reaction was also limited. On this day, the Standard & Poor's (S&P) 500 index closed at 5,980.87, down 0.03% from the previous trading session, and the yield on 10-year U.S. government bonds also remained stable at 4.39%.