If the Fed Chair isn’t feeling pressured to adjust monetary policy, there’s little reason for you to hastily adjust your investments. The recent market dip on Wall Street has stirred quite a bit of anxiety, but it’s crucial to rely on hard data rather than getting caught up in alarming forecasts. Fed Chair Powell’s remarks, made just before the current Fed blackout period, illustrate this point perfectly, and he’s expected to reinforce that message this afternoon when he speaks at 2:30 PM ET.
In a recent address to the U.S. Monetary Policy Forum on March 7, Powell conveyed, “Even amid heightened uncertainty, the U.S. economy remains in a solid position. The labor market is robust, and inflation is nearing our longer-term target of 2%.” He pointed out, “Sentiment readings haven’t been reliable predictors of consumption growth in recent times. We’re continuously monitoring a broad array of household and business spending indicators with great care.”
Powell looked to the future, noting that the new Administration is enacting substantial changes across four key areas: trade, immigration, fiscal policy, and regulation. “Ultimately, the overall impact of these adjustments will be relevant for the economy and the trajectory of monetary policy. Although recent activity has been noted in certain areas like trade policy, uncertainty about the changes and their probable effects remains significant. As we evaluate new data, our focus is on distinguishing important signals from mere noise as the economic outlook progresses. We are in a strong position to remain patient and await clearer insights.”
Despite some rocky sessions in the stock market, the vital indicators the Federal Reserve monitors appear steady. Unemployment is low, wage growth is outpacing inflation, the gap between available jobs and workers has decreased, and the rate at which people voluntarily leave jobs is below levels seen before the pandemic. These are the crucial factors that will influence the course of monetary policy, along with the Fed’s revised dot plot and economic forecasts.