Federal Reserve Chairman Jerome Powell stated at a press conference that the U.S. economy continues to expand moderately and the labor market is showing signs of stabilization, but inflation remains slightly above the 2% target. Therefore, the Fed decided to maintain the federal funds rate target range at 3.5% to 3.75%, reiterating that it will adjust monetary policy direction based on data in the future. Notably, Powell did not answer any questions related to Trump or politics during the press conference.
Powell: The weak housing market and government shutdown have disrupted the economy, but this quarter will see some relief.
Powell noted that overall economic activity continued its steady expansion, with the U.S. achieving stable growth last year and entering 2026 at a relatively solid pace. Recent data showed that private consumer spending remained resilient and business fixed investment continued to grow, providing support for the economy. However, housing market activity remained weak, indicating that the impact of interest rate levels on interest rate-sensitive industries has not yet fully subsided. Furthermore, the previous brief federal government shutdown may have caused some disruption to economic activity last quarter, but this impact is expected to gradually dissipate this quarter as government operations resume. The Fed's overall assessment is that the economy remains on an expansionary trajectory, but performance is diverging across different sectors.
The labor market is showing signs of gradual stabilization after cooling down.
Regarding the labor market, Powell stated that after a period of gradual weakening, several indicators show that market conditions are stabilizing. The unemployment rate in December was 4.4%, showing little change in recent months. Non-farm payrolls have decreased and grown slowly over the past three months, but private sector employment has continued to increase. Job growth has slowed over the past year, partly reflecting a decline in immigration and a decrease in the labor force participation rate, leading to slower labor force growth. Labor demand has also cooled. Despite the clearly weak labor demand, other indicators, including job openings, layoffs, recruitment, and nominal wages, have all increased, showing little change in recent months.
Inflation has fallen significantly, and the Fed is moving toward its 2% target.
Powell pointed out that inflation has declined significantly since its mid-2022 peak, but remains slightly higher than the Fed's long-term target of 2%. Based on data derived from the Consumer Price Index (CPI), personal consumption expenditures (PCE) rose at an annualized rate of approximately 2.9% over the 12 months ending in December, while core PCE inflation was around 3.0%. He stated that the recent high inflation figures primarily reflect the impact of tariffs on goods prices, while service sector inflation continues to show a cooling trend. Short-term inflation expectations have fallen from last year's peak, while most long-term inflation expectations remain consistent with the 2% target.
The Federal Reserve decided to maintain interest rates at 3.5%, with future adjustments depending on data and changes in the outlook.
The Federal Reserve decided to maintain the target range for the federal funds rate at 3.5% to 3.75%. Powell noted that since September of last year, the Fed has cut rates by a total of 75 basis points, bringing the policy rate back to a near-neutral level. He stated that the current monetary policy stance helps stabilize the labor market and supports a continued decline in inflation towards the 2% target. As for whether to further adjust interest rates in the future, it will depend on the latest economic data, changes in the outlook, and a balance of risks, especially as the impact of tariffs gradually fades, allowing for policy flexibility.
This article, "Powell: Labor Market Initially Stabilized, Fed Keeps Interest Rates Unchanged at 3.5% to 3.75%," first appeared on ABMedia, a ABMedia .
