Five Reasons Why Powell’s Fed Remarks Were More Dovish Than Expected

Powell Dismisses Political Influence on Rate Decisions Addressing speculation on political pressure, Powell confirmed that he has had “no contact” with President Donald Trump since the president publicly called for immediate rate cuts. Powell reiterated the Fed’s independence, stating that policymakers remain focused on their mandate rather than external political considerations. He assured markets that the central bank will continue working toward its goals without interference.

Commitment to Inflation Target and Data-Driven Policy Powell reaffirmed the Fed’s commitment to achieving a 2% inflation target, emphasizing that it will not be altered as part of the central bank’s upcoming policy review. He stated that any future adjustments to monetary policy would require “real progress on inflation” or signs of labor market weakness. With the economy still showing resilience, Powell indicated that the Fed does not see an urgent need to shift its stance.

Market Response: Traders Scale Back Rate Cut Expectations Following the Fed’s decision, traders adjusted their rate cut expectations for 2025. According to CME FedWatch data, the probability of no cuts this year rose to 12%, while the likelihood of just one cut increased to 31%, both slightly higher than earlier in the day. Goldman Sachs Asset Management described the Fed’s stance as “pressing the pause button,” suggesting that policymakers are adopting a more patient approach as they await further inflation data.

Outlook: Fed Likely to Stay on Hold Until Clearer Signals Emerge While Powell’s remarks reinforced a data-driven approach, some analysts believe political factors could eventually influence policy. Christopher Rupkey, chief economist at FWDBONDS, suggested that Trump’s return to the White House could add pressure for rate cuts, despite Powell’s assertion of independence. With markets now reassessing the likelihood of further easing, traders will closely monitor inflation and labor market data for signals on the Fed’s next move.

More Information in our Economic Calendar.