Slap Trump in the face! Powell reiterated that there is no emergency rate cut, saying that the economy is still good and the uncertainty is extremely high, and refuses to take the lead in tariffs

Author: Li Dan, Wall Street News

The Federal Reserve's recent meeting decided to suspend interest rate cuts again. After the meeting, Federal Reserve Chairman Powell also reiterated that the Federal Reserve is not in a hurry to act and does not believe that it should take pre-emptive interest rate cuts to deal with the impact of tariffs. It once again slapped the US President Trump, who has repeatedly urged immediate interest rate cuts.

On Wednesday, May 7, Eastern Time, the Federal Reserve released a new monetary policy statement: "The risk of rising unemployment and rising inflation has increased." At the press conference after the meeting, Powell was asked which aspects of the problem that needs to be solved first during his term, whether it is unemployed or inflation.

Powell said the risks of rising unemployment and rising inflation increased. It is not clear which risk is the more worrying issue. "It's too early to draw conclusions." Powell believes that it is necessary to pay attention to the two issues of unemployment and inflation at the same time, and may have to make a choice between them.

When asked if it would take a long time for the Fed to figure out the situation, Powell stressed: "I don't think we know." He also reiterated his previous remarks, saying the Fed would not rush to cut interest rates. He said:

"We don't think there is a need to rush to adjust interest rates."

"We think we can be patient and we will focus on the data."

Meanwhile, Powell stressed that Trump's high tariffs could boost unemployment and inflation. He said:

"If the announced substantial tariff hikes continue, it could lead to higher inflation, slowing economic growth and rising unemployment."

It is a very clear decision to have moderate restrictions on monetary

policy.

Powell commented on the US economy that the economy is still stable. The labor market is generally balanced and is in or close to full employment. Inflation growth has slowed sharply. Salary growth continues to be moderate.

Powell said the current Fed's monetary policy is moderate or moderately restrictive. "The potential inflation outlook is good," he said.

Commentary said this is equivalent to saying that Powell admitted that the current monetary policy is still suppressing inflationary pressure and interest rates are not at a neutral level.

Powell reiterated that the Fed's policy is in good condition and the Fed is not under pressure to take action to cut interest rates, saying "we can act quickly in due time."

Powell said the Fed did not know where the trade policy would go. But for now, "waiting and watching are a pretty clear decision for us." He said businesses, market participants and forecasters are all waiting and watching the situation, insisting that "everyone is waiting."

Commentators believe that judging from the information currently disclosed by the Fed, the threshold for a rate cut in June is quite high.

If the tariffs are maintained high, the Fed's target will not make

progress in the next year.

A reporter asked about the path of soft landing, and Powell reiterated that the Federal Reserve is not yet clear where trade policies such as tariffs will go.

Powell believes that if Trump maintains high tariffs, the Fed will not be able to make progress on the policy goals of its two missions of inflation and employment. He said the Fed's goal may not make any further progress "for at least the next year."

"In view of the scope and size of the tariffs, we are likely to find that the risk of rising inflation and unemployment will certainly increase. If so, if the tariffs are finally implemented at levels that we cannot determine at this moment, we will not be able to make further progress in achieving our goals. We may see this process delayed."

He noted that the Fed will not issue forecasts about the possibility of a recession.

Powell said that companies delay investment decisions and households delay consumer spending decisions. Under such circumstances, the Federal Reserve cannot take "preemptive" actions. He said the Fed's rate cut last fall was not a preemptive move, and if there was any difference, it was a bit late.

"This is not a preemptive situation because we don't actually know how to deal with this data until we see more."

Powell said that in some cases it is appropriate to cut interest rates this year, and in others it is not. "I can't say confidently that I know what the right path is unless we understand more about how this problem will be solved and its economic impact on employment, inflation."

The Fed's statement said uncertainty about the economic outlook "further". Powell also mentioned the uncertainty at the press conference, saying:

My intuition tells me that the uncertainty of economic trends is extremely high.

"Usually, things will gradually become clearer and the right direction will become clearer," Powell said. Meanwhile, he believes that "our (the United States) economy is doing well."

Tariff shocks have not yet arrived. Policy impact on inflation may be

short-term or longer

Powell still believes that the impact of Trump administration policies on inflation may be temporary.

"The impact on inflation may be short-lived, reflecting a one-time change in price levels." But "the impact on inflation may also be more durable."

When asked if the impact of tariffs has not yet arrived, he replied, "Not yet." "People are worried about inflation and the tariff shock, but that shock has not yet arrived."

Powell said the Fed is committed to maintaining its anchored inflation expectations. The Fed may find that the two missions of achieving price stability and full employment conflict. Currently, the Fed is ready to get policy certainty.

"At present we are seeing inflation fluctuating sideways at quite low levels," Powell said.

Powell said there is no need to take action now, and there is no data support action, and said more than once: "We just need to wait and see how things will go."

Comments said this means that the Fed is in a passive rather than active mode. From a market perspective, there is still some distance away from the so-called Fed put options that trigger Fed Put, that is, the Fed is expected to save the market once it falls sharply.

Negotiations may materially change the trade situation or may not

Powell said he could not comment directly on the upcoming high-level economic and trade talks between China and the United States.

Powell mentioned the so-called reciprocal tariffs announced by the Trump administration on April 2, reiterating that the level of new tariffs is far beyond the Fed's expectations.

However, he said immediately that the United States "seems to be entering a new stage of trade" as the Trump administration is opening preliminary trade negotiations with some important U.S. trading partners. This may "substantively change the situation, or it won't." "We are cautious about making concluding judgments when facts change."

"In the end, it's up to the government. It's their duty, not ours," Powell said of trade policy.

U.S. GDP may be repaired to rush imports, making it difficult to

accurately interpret data

Consistent with what Trump administration officials said, Powell expects U.S. GDP data to be raised.

Powell said many survey results show that tariffs push up inflation expectations. He believes that the trade issue makes measuring GDP complicated. The surge in imports in the first quarter will make it difficult to interpret GDP data accurately.

Powell said GDP data conveys one signal, and “private domestic final purchase” (PDFP) data that does not include inventory and government spending may be another. This may be more difficult to understand for the general public. Overall, this situation will not really change the Fed's policy path.

Powell believes that the possible disconnect between surveys on consumer sentiment and actual consumer spending is "another reason (the Federal Reserve) needs to wait and see."

When asked about the Fed’s tools to deal with supply chain disruptions, Powell replied: “We don’t have these tools at all.” It depends on the government and the private sector, he added.

It will not be affected by Trump's call at all and did not ask for a

meeting with the president

Powell said Trump's call for rate cuts "will not affect our work at all." "We always do the same thing, and that's using our tools to promote maximum employment and price stability for the benefit of the American people. We always only consider economic data, prospects, risk balance, and that's all. That's all we have to consider."

A reporter asked Powell how he responded that Trump had said he would not remove him from his position as Fed chairman. Powell replied that he had nothing to say.

There were also reporters asking whether Powell could still continue to serve as a Fed director after the end of his term as chairman of the Federal Reserve in May 2026. Powell also said he had nothing to tell about this.

Asked why he has not met with Trump during his new presidency, Powell replied: "I have never asked for a meeting with any president, nor will I ever."

The path to growth of government debt is unsustainable

A reporter asked whether the Trump administration's spending cuts could impact economic growth. Powell said the Fed took Congress' budget action "for granted." Congress does not need the Fed to provide fiscal policy advice, just as the Fed does not need the Congress to provide monetary policy advice.

But Powell reiterated the warning that the fiscal path is unsustainable. He said:

"One thing we know clearly is that the current trajectory of government debt growth is not sustainable. Debt itself is not at an unsustainable level, but the path to growth is unsustainable."