Jerome Powell ended his final post-meeting press conference as Fed chair with a simple read on the economy: the U.S. is still growing. He said consumer spending is holding up, business investment in data centers remains strong, and GDP should stay above 2% this year even after the Iran war energy shock.
That resilience is why the Fed is not rushing. Powell said the central bank wants to see the “backside” of both the energy shock and the tariff shock before even considering cuts, and said the current policy stance is in a good place. In his telling, inflation is still elevated, but the Fed has enough room to wait and see how much of the oil spike becomes a lasting problem.
- Higher gas prices could still bite: Powell said they pull disposable income out of households’ pockets and can hit GDP if consumers cut spending elsewhere.
- Near-term inflation expectations have risen, and Powell said the energy surge has not yet peaked.
- Data center investment is adding a fresh source of demand even as housing stays weak and labor demand cools.
The tradeoff is getting sharper, not cleaner. Powell said the Fed sees risks on both sides of its mandate: energy can push inflation higher, but prolonged pain at the pump can also slow growth. That makes the policy path awkward, especially with the market now assigning more weight to the possibility of a hike than it did earlier.
The immediate watch item is the next 30 to 60 days, when Powell said incoming developments could still change the picture. If oil stays high and tariff effects linger, the Fed gets to keep waiting. If they fade faster than expected, rate cuts can re-enter the conversation.
