Wall Street’s main indices opened flat on Wednesday as traders assessed Powell’s cautious remarks on inflation and rate cuts.
In the early hours of trading, the Dow Jones Industrial Average (.DJI), opens new tab rose 76.2 points, or 0.16%, to 46,368.94. S&P 500 (.SPX), opens new tab rose 12.9 points, or 0.19%, to 6,669.79, while the Nasdaq Composite (.IXIC), opens new tab rose 82.5 points, or 0.37%, to 22,656.015.
Federal Reserve Chair Jerome Powell said that the US economy is facing a tough situation, with both inflation possibly rising and the job market slowing down. He explained that, right now, interest rates are in a good place to handle either of these issues, so there is no immediate need to lower them aggressively.
Powell mentioned that the risk of higher unemployment is making it harder to reach the Fed’s goals. He said the current policy is “modestly restrictive,” meaning it is tough but flexible enough to adjust if the economy changes.
While he thinks the price increases caused by tariffs might be a one-time thing, he warned that there is still a lot of uncertainty around inflation, and they must be careful not to let it become a lasting problem.
Powell’s comments come just after the Fed made its first interest rate cut since December, and as the debate heats up about whether more cuts are needed. Some Fed officials think the central bank should act quickly to protect jobs, while others want to be cautious about cutting rates too much.
Investors expect the Fed to lower rates again before the year ends, but Powell said there’s no crisis that demands large cuts. He also pointed out that President Trump’s tariffs are raising some prices, while job growth is slowing, making the Fed’s job harder to balance, keeping prices stable and maintaining full employment.
In short, Powell said there are risks on both sides, and the Fed has to be careful in how it moves forward.