Federal Reserve Chair Jerome Powell stated on Monday that the central bank does not anticipate a rate hike this year, despite rising oil prices and inflation pressures. Investors have also scaled back expectations for future hikes, focusing instead on a 'higher-for-longer' policy stance.
Powell addressed concerns about private credit markets, asserting there is no immediate risk of contagion spreading to the broader financial system. He described recent market corrections as localized, noting that while some investors may lose money, systemic risks are not evident. The remarks came amid heightened volatility in private credit markets, particularly after a failed merger by Blue Owl Capital triggered a wave of redemption requests.
The Fed chair reiterated that current interest rates, set between 3.5% and 3.75%, are appropriate to manage economic shocks, including the ongoing Middle East conflict and tariff-driven inflation. Powell estimated that tariffs contribute 0.5% to 1% to inflation but predicted this impact would be temporary. Without tariffs, he suggested inflation would be closer to 2%.
Powell’s term ends in mid-May, and Kevin Warsh has been nominated as his successor. However, Warsh’s confirmation is delayed due to a Senate investigation into renovations at the Fed headquarters. Meanwhile, Powell’s successor has not publicly commented on long-term rate policy directions.
The Fed remains focused on maintaining stable prices and low unemployment, with Powell emphasizing that inflation expectations are 'well anchored' despite short-term energy market fluctuations.