# Powell: No Rate Cuts Until Inflation Improves, Will Not Leave Fed During Investigation, Will Serve as Acting Chair if Necessary (Full Text)

## Key Points from Powell's Press Conference:

1. **Fed Holds Rates Steady, Rate Hike Discussion Returns to Table**: The Federal Reserve maintained its target range for the federal funds rate at 3.5%-3.75%. Powell explicitly stated that rate cuts will not be considered without further improvement in inflation. Simultaneously, committee members have begun discussing "whether rate increases might be possible next," though this remains not the base case for most officials.

2. **Tariffs and Energy Creating "Double Impact" on Inflation**: Powell noted that the disinflation process has noticeably slowed, with short-term inflation expectations rising again in recent weeks. Price pressures from tariffs continue transmitting into core inflation, while Middle East-driven oil prices add new upside risks. Commodity inflation may not show significant declines until mid-year at the earliest.

3. **Labor Market Appears Stable, But Downside Risks Accumulating**: Powell acknowledged that employment growth remains at low levels, and given slower labor force growth, labor market "balance" carries inherent fragility. Energy shocks could create negative ripple effects on employment and economic activity through dampened consumption, compressed profit margins, and supply chain disruptions.

4. **Energy Crisis Escalating, International Oil Prices Surge**: Iran-related military actions have targeted multiple energy facilities, threatening Strait of Hormuz closure. Market concerns about crude supply disruptions have intensified rapidly, with Brent crude briefly exceeding $107 per barrel. Powell emphasized that the duration and magnitude of this shock remain difficult to assess, but potential impacts on U.S. and global economies warrant serious consideration.

5. **AI Has Not Yet Significantly Boosted Productivity at Macro Level; May Raise Neutral Rate Short-Term**: Powell stated that observed productivity improvements cannot be attributed to generative AI, as such effects require years to confirm. Conversely, massive data center construction is currently boosting demand for goods and services, potentially increasing inflation pressures and raising the neutral rate.

6. **Powell Confirms Staying at Fed During Investigation, Will Serve as Acting Chair if Necessary**: He stated he has no plans to resign as governor until the investigation concludes, the process is transparent, and conclusions are clear. If a successor remains unconfirmed when his chair term ends, he will continue serving as acting chair by law until the new chair is formally confirmed, ensuring Fed operations and independence remain insulated from political interference.

On Wednesday, March 18, the Federal Reserve announced its rate decision, holding as expected. Fed Chair Powell stated in his press conference that short-term inflation expectations have risen in recent weeks, while most long-term inflation expectations remain consistent with the 2% target.

Powell indicated in his opening remarks that overall U.S. employment remains stable with a healthy labor market and low unemployment, though inflation remains elevated. He believes the current monetary policy stance helps advance maximum employment and the 2% inflation target. He noted that Middle East developments present uncertain economic implications.

Powell stated:

Current indicators show economic activity expanding at a solid pace. Consumer spending remains resilient, fixed investment continues growing. Housing market activity, by contrast, remains weak.

In the latest Summary of Economic Projections (SEP), the median forecast shows 2.4% GDP growth this year and 2.3% next year, slightly above December's projection. For the labor market, February's unemployment rate was 4.4%, essentially unchanged since late last summer.

Regarding employment, Powell noted that U.S. job growth has moderated. The slowdown over the past year largely reflects declining labor force growth, related to reduced immigration and lower labor force participation, with some weakening in labor demand as well. Other indicators—job openings, layoffs, hiring, and nominal wage growth—have been relatively stable in recent months. The SEP unemployment rate median forecast is 4.4% year-end this year, declining slightly thereafter.

On inflation, Powell stated that U.S. inflation has declined from 2022's peak but remains elevated relative to the 2% target. Data shows that through February, overall PCE inflation rose 2.8% year-over-year, while core PCE (excluding volatile food and energy) rose 3.3%. Higher readings partly reflect tariff-driven commodity inflation increases.

He noted that recent inflation expectation indicators have risen several weeks, possibly reflecting oil price disruptions, while long-term inflation expectations remain broadly consistent with the 2% target. The inflation median forecast is 2.7% this year and 2.2% next year, both slightly above December's projections.

Powell stated:

Middle East developments present uncertain economic implications for America. Near-term, rising energy prices will boost overall inflation, though the scope and duration of economic impacts remain to be observed.

In the SEP, FOMC members provided federal funds rate path forecasts reflecting individual economic outlook judgments. The median forecast shows year-end rates at 3.4% this year and 3.1% next year, essentially unchanged from December.

Powell noted that as always, these individual forecasts carry uncertainty and do not represent committee plans or decisions. Monetary policy has no preset path; the Fed will decide based on data at each meeting.

In the subsequent Q&A session, Powell stated that previous shocks interrupted the Fed's inflation-fighting progress. He emphasized that without inflation improvement, rate cuts won't occur.

He indicated that rates currently sit near the boundary between restrictive and non-restrictive, believing maintaining mild rate restriction matters significantly. The Fed faces difficult tradeoffs balancing various risks. He also said that rate increases have indeed been mentioned as a possibility, though most officials don't view this as the base case.

Regarding his much-discussed future, Powell confirmed he won't resign during the investigation. He said that if a successor hasn't been confirmed when his chair term ends, he'll continue serving as acting chair, safeguarding Fed independence from political interference.

**Following is the Q&A from Powell's press conference:**

**Q1: Some argue the Fed should "look through" oil spikes from Middle East conflict. Is this appropriate now? Also, inflation has exceeded targets for roughly five years—how much does this affect committee judgment?**

**Powell:** First, I want to say we're very aware of inflation's recent performance. Sequential shocks disrupted our progress. The latest came from tariffs, which will also affect future inflation.

What we're really focused on this year is whether inflation can make progress, particularly commodity inflation declines. As tariffs' one-time price effects gradually work through the economy, we hope to see such progress. That's our primary focus. We need to see this progress to confirm we're truly improving. Overall, we haven't actually made progress. If you look at overall core inflation, it's around 3%. A significant portion—roughly 0.5 to 0.75 percentage points—comes from tariffs, and we're watching whether this reverts.

Whether to "look through" energy inflation is actually premature before confirming the above progress.

Traditionally, facing energy shocks, one typically "ignores" them. But this always depends on whether inflation expectations remain anchored.

Regarding the broader context you mentioned—inflation persistently above target—we must factor these in. When truly deciding whether to "look through" energy inflation, we won't act rashly but will handle it carefully against the backdrop you described.

**Q2: On the SEP, why do most officials still favor rate cuts when core inflation is revised higher while growth and unemployment forecasts are basically unchanged? In other words, what's the logical basis for rate cuts? Why are they necessary?**

**Powell:** With 19 committee members, you get 19 different views and 19 independent forecasts.

But if you notice, the median actually didn't change. There have been some adjustments, however, notably in the direction of "reducing projected rate cuts."

For instance, four to five members shifted from projecting two cuts to one cut. Each brings their own logic and rationale.

Overall, the core judgment is that our forecast assumes inflation will continue improving. Though the improvement pace is slower than previously expected, progress should still occur. This should become evident in mid-year, primarily as tariff effects fully transmit and tariff-driven inflation declines. We should observe this.

Additionally, it's crucial to emphasize that the rate path forecast is conditioned on economic performance. Without inflation improvement, rate cuts won't occur.

**Q3: Is the 2026 inflation forecast increase entirely from this oil shock, or are other factors involved?**

**Powell:** That's certainly part of it. But you know, this won't be core inflation's primary source. Oil shocks obviously show in data, with some entering core inflation.

But it's not just that. We also haven't seen the commodity inflation improvement we previously expected, including tariffs and related factors.

Regardless, people raising inflation forecasts does relate partly to Middle East developments and oil movements.

Simultaneously, this reflects slower-than-expected tariff-related inflation progress. We still expect progress, but the question is how long these effects take fully transmitting through the economy. It's inherently time-consuming.

**Q4: The SEP didn't change—explain why? Is it more that you expect oil shock impacts gradually transmitting and fading, or concern about wealth effects from stock declines and rising oil pressuring consumption—consumers shifting from other spending to gasoline? So unchanged rate forecasts reflect viewing oil shocks as temporary, or expecting growth slowdown?**

**Powell:** I want to emphasize: nobody knows outcomes. Economic impacts could be negligible or substantial—we genuinely don't know.

People are just making forecasts they consider reasonable, without strong conviction.

As you say, if oil remains elevated for extended periods, consumption, disposable income, and overall spending would be pressured. But we don't know if this occurs. Oil-to-inflation transmission could also be weaker than expected.

In this SEP, many even mentioned that if skipping one would be appropriate, this might be it. We truly are uncertain.

I wouldn't say there's clear judgment that impacts quickly fade or don't. You must write a forecast, but it's just filling it based on current information.

We're not debating how long these impacts persist or their magnitude, as those are inherently hard to judge. Everyone must submit their forecast.

Also, having written one forecast, you typically don't radically revise unless uncertainty is extreme. This shock's directionality itself remains very unclear.

Simultaneously, the U.S. economy's fundamentals are solid, growth remains robust, with inflation overruns primarily from commodities and tariffs.

Labor markets: unemployment since September has barely moved. With both demand and supply growth limited, the employment balance still appears at lower levels.

Overall, the American economy functions quite well. We just don't know what this shock ultimately brings. Frankly, nobody does.

**Q5: Previously, the Fed noted rising oil pressures consumption, but domestic energy production increases partly offset this. Can you discuss this dynamic? Especially, what's current U.S. energy production roughly like?**

**Powell:** First, the traditional, long-held view is that energy shocks are usually "looked through," as I mentioned—contingent on factors like stable expectations.

The "offsets" framing is correct. America is now a net energy exporter. Rising oil pressures on employment and economic spending are somewhat offset by rising oil company profits and increased drilling.

However, ask oil companies about drilling increases, and they typically want seeing oil sustained above pre-shock levels and confidence it persists considerably.

They won't launch massive drilling because oil just breached $70 per barrel. They'll judge more rationally that oil will remain elevated for extended periods. And this increase needs being "significantly higher."

Without reaching that threshold, changes won't be dramatic; achieving it brings some increases over time.

Overall, this oil shock's net effect still creates downside pressure on consumption and employment, while obviously creating upside inflation pressure.

So the American economy, after so much major change, has performed quite well. Seeing that is genuinely surprising.

I don't know what happens between meetings or how Middle East developments unfold. I won't speculate.

**Q22: What makes you believe tariff price increases are one-time? Since the Supreme Court ruled on tariffs, we haven't seen you. Nobody knows tariff reversal's impact. What makes you think tariffs are only one-time price effects?**

**Powell:** I wouldn't use "certain" describing my view. I'm uncertain.

Essentially, tariffs are one-time price increases for certain goods, right? Inflation means prices rising continuously this year, next year, thereafter. That's inflation. It's not one-time. The distinction is huge, but people often miss it. That's the key difference.

Theoretically, tariffs should be one-time effects. Unless they cause expectations of more tariffs next year, more the year after—then they're typical one-time shocks. Traditionally, that same logic applies to energy price increases.

Usually, prices rise then fall. By the time monetary policy works, the shock has often passed.

So I'm not highly confident here. I think the theory holds. But as always, transmitting these effects through the economy takes immensely uncertain time. We saw this post-pandemic. Inflation did decline, partly as we judged, but took two extra years.

So we must stay humble about tariff impact transmission timeframes.

Currently, our staff continuously researches this—actually quite interesting. Initially only estimates existed, lacking sufficient history.

As historical observations accumulated on tariff-to-price transmission, a clearer path emerged. For most tariffs, we can say confidence slightly increased that "tariff inflation gradually recedes." Notice: inflation receding, not prices falling. Meaning no further increases. We expect increasingly clear evidence mid-year.

You're right, post-Supreme Court, tariff levels noticeably declined. But the government stated it would gradually raise tariffs back. So we assume they'll restore them over time.

That's our current judgment approach.

**Q23: You mentioned SEP limitations earlier. One more point, especially pre-transition. For the public, is understanding other Fed officials' views—especially those remaining through year-end and beyond—still valuable? Also, does this somewhat constrain your successor? If the committee expressed views, does this somehow "lock in" their policy path this year?**

**Powell:** No, absolutely not. Everyone in the SEP can adjust their "dot" anytime. These forecasts carry no binding force. It's just personal judgment at one moment, changing with events, sometimes very rapidly.

It never "locks" anyone. Everyone's happy being proven right or wrong, either direction.

So I think we should continue publishing. As I mentioned, this period is genuinely difficult. During the pandemic, we skipped SEP one meeting. But we're reluctant doing so—it's genuinely hard—yet we should persist.

However, I must note: this forecast uncertainty exceeds normal levels. Treat these results carefully; don't over-interpret.

**Q24: You mentioned being very aware of inflation's long-term target-exceeding history. This seemingly reflects in ordinary people's feelings. Considering consumers drive overall economic activity, is this affecting their psychology?**

**Powell:** I'm uncertain of the underlying reasons. But I can share what we see from surveys.

People experienced major price increases. Not just America—it's global. Post-pandemic societies basically all experienced similar inflation rises.

Over roughly three years, actual wages have actually grown everywhere. But people don't truly "feel better" yet. We think people need several more years of sustained real income growth before regaining confidence.

You're right—talking with ordinary people, they definitely feel stressed. Some price areas still rise, like insurance—all insurance costs increasingly expensive. This actually reflects earlier inflation's lagged effects, often needing time fully manifesting.

We take this seriously. We never dismiss these feelings. From people's actual lived experience, it's very real.

For us, this makes us even more committed (if possible) to firmly reducing inflation back to our 2% target.

**Q25: What role does Fed independence play in "affordability"?**

**Powell:** Independence lets us fulfill our duties. Price stability is half our mandate; maximum employment is the other half. Having this independence matters critically, enabling necessary measures maintaining price stability. It's universally accepted standard practice.

I think this enjoys broad support, especially in Congress—our oversight body is Congress. Whether House or Senate, Democrat or Republican, this has...